Just two months before the present program expires, the administration is looking into receiving another loan from the International Monetary Fund (IMF).
Treasury Cabinet Secretary John Mbadi told Reuters on Wednesday that, while Kenya has alternative loan choices, the IMF remains one of the most feasible, following widespread protests last year over the controversial Finance Bill.
“Maybe before the current program comes to a close in April, there should be some indicators of whether we are starting a new program and what that new program will entail,” Mbadi said.
Among the options on the table is a Ksh193.8 billion (USD1.5 billion) borrowing facility from the United Arab Emirates with an interest rate of 8.25 percent.
However, Mbadi revealed that the government was still examining alternative ways, including Eurobonds, to fund budgets for this fiscal year.
The CS added, “We have the option of taking that… or we go to the market, which is open now, and with our good and positive credit.”
Despite Kenya’s favorable borrowing relationship with the IMF, the most recent significant loan payment fell far short of the government’s expectations for a massive release.
The IMF Executive Board approved the payout of KSh 78.3 billion (USD 606.1 million) in October 2024, as part of the Resilience and Sustainability Fund’s (RSF) second assessment.
According to the IMF, the withdrawal of the Finance Bill delayed Kenya’s path to fiscal consolidation due to a revenue deficit, which contributed to the disbursement being lower than projected.
As it is, Kenya could use extra financing, especially since the US opted to freeze foreign aid, which might harm many third-world economies.
Kenya’s debt burden has risen to an unprecedented Ksh10.5 trillion after President William Ruto’s administration took on fresh loans totaling Ksh303.2 billion in the fiscal year ending June 2024.
According to a 2024 Treasury report, the debt-to-GDP ratio fell slightly from 72 percent to 65.7%. The Treasury has previously identified budget restrictions as a critical component in debt management, emphasizing that borrowing has become a substantial source of budget finance.
Despite the hurdles, Mbadi expects the economy to improve this year, with his predictions showing a 5.3% increase from an estimated 4.6% last year.
