The International Monetary Fund plans an in-depth review of Kenya’s debt to determine the nation’s financing needs under a new program.
A debt sustainability analysis will be conducted “by the time of the IMF board’s consideration of a request for a new fund program,” a spokesman said in an emailed response to questions. “A full DSA helps to establish the member’s capacity to repay the fund.”
Details on the timing of the study and when talks for a new program will take place “will be provided in due course,” the spokesman said.
Kenya needs to raise at least $26 billion in the next decade to pay maturing foreign debt and another $1.5 billion annually to meet external interest payments.
The East African nation has requested a new program with “realistic targets” after abandoning the final review of a four-year arrangement, giving up about $850 million of financing. In its budget estimates for the coming fiscal year, the National Treasury hasn’t penciled in any IMF funding.
Assuming they reach a workable DSA, the parties will then have to agree on whether there will be financing attached to a fresh arrangement or not. Both scenarios throw up complexities, according to David Cowan, Citigroup’s chief Africa economist.
The nation is already close to exhausting its IMF borrowing quota, he said in a note to clients last week. A non-funded program, on the other hand, may be insufficient to enhance fiscal discipline ahead of elections in 2027. Negotiating a flexible credit line to be drawn down when needed may be a better policy option, he said.
The Kenyan authorities routinely struggle to meet certain program targets and last year were forced to backtrack on aggressive tax measures after they triggered deadly protests. The government’s coffers are being strained by underperforming revenue, increasing debt repayments, and arrears carried over from previous administrations.
A separate IMF assessment of how graft is sapping Kenya’s public finances will begin in June.
