WOES OF KENYA'S IMF ADDICTION

Kenya is an IMF loan junkie, and the unpleasant side effects of a missed hit could be about to be felt.

The East African country is facing a $480-million budget shortfall after the Washington-based institution scrapped a review of a $3.6-billion loan deal signed in 2021 that will expire on 1 April. IMF officials visited Nairobi in early March to assess progress on the agreement, only to discover that treasury officials had neglected to meet essential commitments - namely, reducing spending and boosting revenue.

Kenya is trapped in a debt crisis, forcing the government to rely on loans to keep the economy afloat. But IMF loans come with strings attached, including cuts to subsidies that cushion struggling citizens from high prices on essentials such as fuel and steep tax hikes to shore up revenue.

With a debt-to-GDP ratio of 69.9%, Kenya finds itself in a precarious position, grappling with increasing debt obligations while its economy struggles to keep pace with repayments.

Kenyans hard-pressed by a cost-of-living crisis protested against IMF-backed tax increase proposals during the 2024 budget cycle, forcing president William Ruto to shelve the lender's punitive austerity measures.

Now, Nairobi is on the hunt for alternative funding sources to fill the void, all while pursuing a new programme with the IMF. In January, it negotiated a $1.5-billion loan with the United Arab Emirates, which pushed state borrowing beyond the limits set by the IMF.

Critics say relying on handouts is a bad strategy for financing its budget. According to Prime Cabinet Secretary Musalia Mudavadi, Kenya loses a staggering $4.7 billion, or 7.8% of its GDP, to corruption each year.

Might cutting back on lavish spending and tackling corruption be a better way for Kenya to achieve financial independence?

Sources

https://newscentral.africa/kenya-abandons-existing-imf-programme-in-pursuit-of-new-loan-agreement/

https://www.reuters.com/world/africa/imf-has-received-formal-request-new-kenya-funding-programme-2025-03-17/

https://www.kenyans.co.ke/news/110030-kenya-seeks-new-imf-bailout-after-ditching-ksh1034-billion-loan-review

https://africacheck.org/fact-checks/reports/third-kenyas-budget-stolen-we-checked-former-senators-claim-about-much

https://www.kbc.co.ke/kenya-exploring-new-facility-after-talks-with-imf/

https://www.standardmedia.co.ke/politics/article/2001513909/two-edged-sword-raila-ruto-deal-can-build-destroy-country-at-will#google_vignette

https://www.the-star.co.ke/counties/coast/2024-08-16-kenya-loses-sh608bn-to-corruption-annually-mudavadi

https://www.citizen.digital/news/inside-ruto-raila-power-agreement-and-what-it-means-for-kenya-n358797

https://archive.ph/kA7Qk