The International Monetary Fund (IMF) has approved a historic loan of $938 million (864 million euros) for Kenya, aimed at stabilizing an economy facing major challenges.
The Kenyan economy, considered the powerhouse of East Africa, has been seriously affected by liquidity pressures, exacerbated by the cumulative effects of Covid-19, repercussions from the war in Ukraine and a devastating drought in the Horn of Africa. The economic shock, combined with public debt reaching more than 10.1 trillion shillings (64.4 billion euros) at the end of June, or around two thirds of gross domestic product, has put the country under financial strain .
The loan granted by the IMF aims to relieve pressure on liquidity, particularly in anticipation of the repayment of a $2 billion Eurobond maturing in June 2024. The first tranche of this loan, worth 682 million dollars, will be accessible immediately if the agreement is validated by the IMF board of directors at its meeting scheduled for January.
Despite the challenges, the IMF noted a notable recovery in key sectors such as agriculture and tourism. The agricultural sector particularly rebounded thanks to the return of the rains, contributing to real GDP growth of 5.4% in the first half of 2023.
However, the situation remains delicate, marked by persistent inflation and high prices for gasoline, basic foodstuffs and energy. In addition, public debt service, mainly to China, has seen a sharp increase, aggravated by the depreciation of the national currency.
In a bid to reduce debt, the government led by President William Ruto implemented a controversial budget, generating tensions among the population and sometimes leading to violent protests. This budget includes a series of new taxes intended to generate additional revenue to fuel a planned budget of 3.6 trillion shillings (24 billion euros) for the 2023-24 financial year.
Despite these challenges, the agreement with the IMF represents an important step towards Kenya’s economic stabilization. The IMF board’s decision in January will be decisive for the country’s financial future, as Kenyan authorities continue to address economic challenges with measures to consolidate the country’s financial situation.