By George Obulutsa and Duncan Miriri
NAIROBI (Reuters) -Kenya and the International Monetary Fund will discuss a new lending programme and abandon the current one, as the country struggles to get its economy back on track after a borrowing spree led to a surge in debt-servicing costs.
The East African nation needs continued financial support from the Fund to keep up with debt repayments that have accumulated as a result of heavy government spending in recent years.
“The IMF has received a formal request for a new program from the Kenyan authorities and will engage with them going forward,” Haimanot Teferra, the IMF’s mission chief, said in a statement issued at the end of a visit to Nairobi.
The statement said the two sides had “reached an understanding that the ninth review under the current Extended Fund Facility and Extended Credit Facility programs will not proceed.”
The combined ECF/EFF facility, which is set to expire next month, is worth a total of $3.6 billion.
The news sent Kenyan dollar bonds lower, with the 2032 and 2048 maturities falling by more than 1 cent each to bid at 90.136 and 80.173 cents on the dollar, respectively.. Some maturities traded at their lowest in around six months.
Under the current lending programme, a total of $3.12 billion had been approved for disbursement by the end of last October, the IMF said, implying the ninth review could have unlocked a final disbursement of about $480 million.
Neither IMF officials, nor their Kenyan government counterparts, responded to requests for clarification on how much was at stake under the ninth review.
The IMF’s statement did not mention a Resilience and Sustainability Facility, approved for Kenya in July 2023, which had by the end of last October disbursed $180.4 million of the total $541.3 million.
The IMF has received a formal request for a new programme from the Kenyan government, Teferra added, without specifying if it will be a lending or non-lending programme.
Finance Minister John Mbadi told Reuters last month that the government would be seeking a financing programme.
The current ECF/EFF programme began in April 2021. Its implementation, however, has been hampered by deadly anti-tax hike protests last year and a row over new borrowing from the United Arab Emirates.
The government has been scrambling to secure new sources of financing, including efforts to boost domestic revenue collection, to keep up with the debt servicing burden and pay for critical expenditures such as climate change adaptation.
Kenya’s total debt-to-GDP stood at 65.7% as of June last year, finance ministry data showed, well above the 55% level considered a sustainable threshold.
Last month, it joined a fast-growing club of African nations that have gone to the market in recent months, to borrow cash to pay off maturing debts in a bid to smooth out liabilities and ring-fence critical expenditures like health.
Others who have carried out those so-called liability management exercises include Ivory Coast and Angola.
(Reporting by George Obulutsa and Duncan Miriri; Editing by Edwina Gibbs and Ros Russell)
