The International Monetary Fund (IMF) and Kenya are scheduled to discuss a new lending arrangement following Kenya's decision to discontinue its curr
Quick overview
- The IMF and Kenya are set to discuss a new lending arrangement after Kenya decided to end its current program due to economic challenges.
- Kenya’s debt-servicing costs have surged due to excessive borrowing and increased government spending, prompting a request for ongoing IMF assistance.
- The current $3.06 billion Extended Fund Facility and Extended Credit Facility programs will conclude, disappointing the market and potentially limiting available funding.
- Despite these challenges, Kenya is exploring additional funding sources, including a $12.5 billion loan from the UAE and a new $12.5 billion Eurobond.
The International Monetary Fund (IMF) and Kenya are scheduled to discuss a new lending arrangement following Kenya’s decision to discontinue its current program.
This action is taken in light of Kenya’s ongoing economic difficulties, which include a precipitous rise in debt-servicing expenses because of excessive borrowing.
The East African country is requesting ongoing IMF assistance to pay off its mounting debt, which has increased because of recent increases in government spending.
The parties have decided to end the ninth review under the current Extended Fund Facility (EFF) and Extended Credit Facility (ECF) programs, and Kenya has formally asked the IMF for a new financial arrangement. Next month marks the expiration of the current $3.06 billion combined ECF/EFF facility.
According to the current agreement, $312 billion had been authorized for disbursement as of October 2024, and an additional $480 million might have been made available through the ninth review. However, Kenyan dollar bonds posted a moderation with maturities falling more than 1 cent each because of the announcement that the review wouldn’t proceed.
The conclusion of the current IMF program has disappointed the market, and analysts predict that up to $800 million in funding may no longer be available.
Nonetheless, there is still hope as Kenya seeks to access additional funding sources, including a $12.5 billion loan from the United Arab Emirates and a newly issued $12.5 billion Eurobond.
These advancements are viewed favorably.
Olumide Adesina
Financial Market Writer
Olumide Adesina is a French-born Nigerian financial writer. He tracks, analyzes, and reports changes in financial markets with over 15 years of working experience in investment trading.
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