IMF Staff Agrees to Lengthen Credit for Cash-Strapped Kenya by $1B

The International Monetary Fund announced that it had struck an agreement with Kenya at the staff level that would give the country’s cash-strapped government access to an additional $1 billion in loans.

Kenya is struggling with a $70 billion public debt mountain, but loan repayments have increased as the local shilling plunged to all-time lows against the dollar.

The administration of President William Ruto has drawn up a 3.6 trillion shilling ($26.2 billion) budget for 2023–2024, with additional levies planned that are projected to raise 289 billion shillings.

The IMF agreement, which must be approved by its board in July, comes after a team from the international lending institution visited the country earlier this month.

In a statement released on Tuesday, the IMF announced that it will enhance its total commitments to Kenya from the $2.43 billion previously committed in April 2021 to $3.52 billion.

Kenya will have immediate access to $410 million if granted in July, it stated.

Kenya has been battling a problem in the cost of living, a brutal drought, and the depreciation of the shilling.

As a result, economic growth slowed to 4.8 percent last year from 7.6 percent in 2021.

“The government budget has been under pressure from shortfalls in revenue collection and challenging financing conditions,” the IMF said.

The agency urged the government to overhaul state-owned enterprises like the national airline Kenya Airways and utility company Kenya Power, both of which are losing money.

The opposition has criticized Ruto’s government for hitting ordinary Kenyans with these taxes on a variety of things, including beauty products, gambling, various meals, and petrol, in an effort to cut the budget deficit.

While the IMF said it had a favourable medium-term outlook for the Kenyan economy, “significant challenges remain against the backdrop of slow global economic growth and tight financial conditions”.