Kenya Seeks New IMF Program After Failing to Secure $800 Million

(Bloomberg) -- Kenya requested a new funding program from the International Monetary Fund after agreeing not to proceed with a final review of an existing facility that would have unlocked $800 million.

The current $3.6 billion, four-year program, signed in the wake of the Covid-19 pandemic that ravaged Kenya’s and other economies, ends on April 1. The expiry of the facility without the final disbursement will leave Kenya with a budget-financing gap. 

“The Kenyan authorities and IMF staff have reached an understanding that the ninth review under the current extended fund facility and extended credit facility programs will not proceed,” the lender said in a statement following a staff visit. “The IMF has received a formal request for a new program from the Kenyan authorities and will engage with them going forward.” 

Under the current program, Kenya failed to reach key benchmarks including slashing its fiscal deficit and increasing revenue-raising measures. Its attempts to introduce new taxes or widen the tax bracket in the past two budgets led to violent protests last year that left dozens of people dead.

Last month, Kenya bought back some of its eurobonds and issued longer dated securities, and said it will use the balance of about $950 million to retire expensive syndicated loans owed to the Trade and Development Bank. It’s also expecting the full disbursement of a $1.5 billion loan from the United Arab Emirates that was initially supposed to be staggered over two tranches.

Last year, Treasury Secretary John Mbadi said the IMF “expressed some reservations” that the UAE loan may expose Kenya to foreign-exchange risks and that the amount was beyond its commercial-borrowing ceiling for the current fiscal year.

In the budget year that starts in July, Kenya plans to lower the portion of foreign loans to about 18% of the total on lower IMF receipts. It projects a fiscal gap of about 4.9% of gross domestic product this year and 4.3% in the next one.

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