Kenya Backtracks on Ksh103 Billion IMF Loan as S&P Raises Funding Delay Concerns
Kenya Backtracks on Ksh103 Billion IMF Loan as S&P Raises Funding Delay Concerns
Kenya has made a sudden U-turn, now requesting the International Monetary Fund (IMF) to release Ksh103.77 billion, previously left out of a new program. This comes just days after the nation announced it was abandoning the final review of its existing $3.6 billion loan agreement.
This abrupt move follows a stark warning from S&P Global Ratings. They cautioned that missing IMF disbursements could delay crucial funding from the World Bank and the UAE, raising concerns about Kenya’s debt management.
S&P highlighted that failing to secure the IMF’s final $850 million tranche could disrupt expected inflows, including an $800 million World Bank loan and a $1.5 billion UAE facility.
“IMF funding often serves as a catalyst for other official and private flows,” S&P stated. They also indicated that Kenya might now resort to costlier domestic borrowing to cover financing gaps. The ratings agency also flagged risks to Kenya’s rising debt-servicing costs.
Treasury Cabinet Secretary John Mbadi confirmed the new IMF application. He insisted that the decision to forgo the ninth review was due to time constraints, not unmet targets. Mbadi denied reports of a rift with the IMF, claiming $800 million in unused funds could be rolled into the new agreement.
However, reports suggest Kenya failed to meet fiscal deficit and revenue collection benchmarks. Mbadi dismissed these claims as “inaccurate.” This sudden shift has unsettled investors, briefly impacting Kenya’s dollar bonds.
The IMF has stated that discussions for the new program will proceed “in due course.” Analysts believe securing fresh funding depends on reforms in the upcoming 2025 Finance Bill, which faces public opposition after previous tax protests.
The Treasury aims to reduce foreign borrowing to 18 percent of total debt, relying more on domestic markets and reserves. S&P noted Kenya’s $10 billion in foreign exchange reserves could provide short-term relief, but warned of higher costs from commercial borrowing.
The World Bank loan, tied to legislative reforms, remains uncertain. Mbadi insists it’s independent of IMF approval, but S&P’s assessment suggests otherwise. The UAE’s $1.5 billion commitment also faces delays, further straining Kenya’s finances.
Last month, Kenya restructured part of its Eurobond debt, using $950 million to retire expensive loans. The Treasury projects a budget deficit of 4.9 percent of GDP this year, and 4.3 percent in 2025.
Economists remain skeptical, questioning if revenue measures can offset spending pressures.
In Other News; Law Enforcement Steps In After Widow’s Burial Attack Stirs Uproar
Kenya Backtracks on Ksh103 Billion IMF Loan as S&P Raises Funding Delay Concerns
