On the 18th of July 2022 the International Monetary Fund (IMF) met to review the request made by Kenya for an additional loan of 244 million United States Dollars which translates to around 28 billion Kenyan Shillings. The request for the additional loan is coming at a time when the East African nation has been unable to meet specific conditions which include the creation of a payroll.
The International Monetary Fund (IMF) also made it known that Kenya requested for a number of waivers on the programme. It stated that the country had been unable to fulfill some of the terms set in April of 2021 when a total of 2.34 billion United States Dollars (which is around 257 billion Kenyan Shillings) was approved for Kenya as a loan.
Among the said terms Kenya was to carry out a special audit on the expenditure done during the still ongoing Coronavirus pandemic, improve the government owned companies implement the declaration of wealth or assets for public servants in order to gain access to the loan which would be provided in tranches.
The International Monetary Fund (IMF) during an update released in December of 2022 stated that, “The decision to implement a common payroll system across MDAs [ministries, department and agencies] and counties was delivered with the articulation in late October of an agreed roadmap to implement the payroll system by June 2022.”
The Kenyan government has however been unable to completely launch the common payroll system.
Another term stated by the International Monetary Fund (IMF) was that the Kenyan government should make public knowledge, the ownership details of every company that has been granted a public tender so as to prevent any chance of taxpayers’ funds getting misappropriated.
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The Kenyan government has so far, been able to deliver on a number of the terms set by the International Monetary Fund (IMF). This resulted in the International Monetary Fund (IMF) and other parties involved, coming to a staff level agreement on the 25th of April 2022, pending the approval of the release of said funds by the board.
The International Monetary Fund (IMF) made it known that though its brief that, “Third Reviews under the Extended Arrangement under the Extended Fund Facility and Under the Arrangement under the Extended Credit Facility, Requests for Modification of Quantitative Performance Criteria, and Waiver of Applicability for Performance Criteria under the Arrangement under the Extended Fund Facility.”
The International Monetary Fund (IMF) which is a multilateral lender, is currently having a significant role in the formation of a policy which would require the Kenyan government to put tougher measures in place across numerous sectors.
The terms set by the International Monetary Fund (IMF) is as a result of the multibillion Kenyan shilling loans it has provided to Kenya where said funds have been channeled to the budget to bolster up the public funds.
During the administration of former President Mwai Kibaki the East African nation of Kenya avoided loans of that nature. Whenever support was provided by institutions like the World Bank and the International Monetary Fund (IMF), it came in form of support for projects.
The International Monetary Fund (IMF) made it known that Kenya is currently on track with regards to meeting its fiscal objective under the programme. It added that its strong tax performance this year was providing resilience support in spite of economic battles being faced worldwide.
The International Monetary Fund (IMF) revealed as indicated in April of 2022 that by the middle of July of 2022, the completion of the review will make it possible for Kenya to gain access to around 239 million United States Dollars which is around 28.3 billion Kenyan Shillings at the current exchange rates.
A spokesperson for the International Monetary Fund (IMF) stated that, “The third reviews of Kenya’s EFF/ECF arrangements are progressing well and a meeting of the IMF board to complete the review is expected in mid-July.”
Kenya has been faced with an increase in the costs of paying back its United States (US) Dollar loans at a time when it is looking to getting into global markets more as it continues cushion budget deficits even with improve tax collections numbers by the Kenya Revenue Authority (KRA).
In the fiscal year which ended in June of 2022, the Kenya Revenue Authority (KRA) hit 2.031 trillion Kenyan Shillings in revenue collection. This is significantly higher than its initial target of 148.9 billion Kenyan Shillings.
Kenya has however experienced challenges with regards to securing United States (US) Dollar loans as more and more markets continue to ask for higher returns. This also resulted to the cancellation of the Eurobond of 1 billion United States (US) Dollars which is around 118.5 billion Kenyan Shillings.
Ukur Yatani who is the Treasury Cabinet Secretary stated that the Eurobonds became quite expensive after the invasion of Ukraine by Russia. This led to Kenya reconsidering issuing a bond.
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Kenya will now be going back to the system of syndicated loans. The last time this happened was in 2019 under the former Treasury Cabinet Secretary; Henry Rotich. The Kenyan government then changed its borrowing policy from commercial banks in a bid to lower the cost of debt and also increase the maturity term so as to facilitate easier repayment.
The country has now had to leave its strategy to switch the profile of its debt to sovereign bonds with longer repayment dates as opposed to short term commercial loans which are more expensive. The decision is now in direct conflict with the terms set by the International Monetary Fund (IMF).
Kenya has reached an agreement with the International Monetary Fund (IMF) to stay on the concessional finance lane in order to lower any debt vulnerabilities which could occur.
The deal also resulted in it stepping away from syndicated loans and move towards Eurobonds and multilateral loans.
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The country is looking to balance out its portfolio after its commercial debt accumulated and repayment became more expensive taking as much as sixty three (63) percent of the revenue generated from taxes collected.
The Treasury Cabinet Secretary; Ukur Yatani revealed to the Kenyan Parliament in 2020 that commercial loans would only be coming in in the form of Eurobonds so as to roll over the principal payments when the debts mature.
Kenya’s commercial debt is majorly in Eurobonds. It has an outstanding portfolio worth a total of 7.1 billion United States (US) Dollars which is around 829.9 billion Kenyan Shillings that is traded on the London Stock Exchange and the Irish Stock Exchange.
In the past couple of weeks Eurobonds have grown significantly to now trade higher than ten (10) percent in the secondary market and further proof of the pricing Kenya will get if it goes to the International market.
On the 8th of July 2022 Kenya’s borrowing hit a total of 8.4 trillion Kenyan Shillings which is seventy (70) percent of the total Gross Domestic Product (GDP) from 48.6 percent in 2015. It is believed that the current levels are not sustainable.
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