Kenya pushes IMF to soften loan support terms


Kenya pushes IMF to soften loan support terms
File Image of Treasury Cabinet Secretary Ukur Yatani. PHOTO| COURTESY

In Summary

  • Kenya has cited the conditionality to loan programs as too strict arguing such terms may end with adverse market implications on countries who fall through in their quest for assistance.
  • Further, Yatani has probed the IMF to support member countries with debt restructuring to ensure the process's timeliness and cost effectiveness.
  • Kenya’s access to IMF financing have been tied to tough domestic reforms, demanded by the Fund including raising tax revenues and committing to fiscal consolidation including the ongoing State Corporations restructure.

Kenya has pushed the International Monetary Fund (IMF) to soften terms attached to its loan support programs.

The push by Kenya which preceded the IMF’s Executive Board approval of a new Ksh.255.1 billion loan facility has been made through a consultative meeting between the Bretton Wood’s institution Managing Director Kristalina Georgieva and African Finance Ministers held on Thursday afternoon.

Kenya has cited the conditionality to loan programs as too strict arguing such terms may end with adverse market implications on countries who fall through in their quest for assistance.

“IMF flexibility is vital in the current environment when negotiating a program. Program conditionality has to be realistic, monitor-able and country specific. Without this, countries find themselves in endless and sometime non-productive negotiations with the Fund, which can also have adverse market implications if markets think there is a problem,” said National Treasury Cabinet Secretary Ukur Yatani.

Further, Yatani has probed the IMF to support member countries with debt restructuring to ensure the process’s timeliness and cost effectiveness.

Kenya has previously probed for debt restructure to poor and low-middle income countries by the IMF and the World Bank on the back of COVID-19 related vulnerabilities.

“Supporting member countries efforts to deal with debt restructuring in an effective and timely manner is also critical. As recent experiences show, debt restructuring can be protracted, time consuming and expensive if the country has to hire debt advisors,” he added.

“Effective technical assistance could be considered to help prepare countries and facilitate the process.”

Kenya’s access to IMF financing have been tied to tough domestic reforms, demanded by the Fund including raising tax revenues and committing to fiscal consolidation including the ongoing State Corporations restructure.

Nevertheless, the country’s negotiations with the IMF for emergency funding have proved a success with Kenya having just earned a Ksh.255.1 billion ($2.34 billion) 38-month loan program on Friday adding to a Ksh.80.6 billion ($739 million) loan earned in May 2020.

The support by the IMF is expected to be crucial for Kenya as it seeks to return to the sovereign bond markets later this year from which it expects to draw a combined Ksh.248.1 billion by June next year through a Eurobond issuance.

By June, Kenya is expected to push for an initial Ksh.123.8 billion in sovereign bond disbursements and will hope to anchor the debt issuance on the support ad backing of the IMF.

Further disbursement of loan support from the World Bank is also expected solidify Kenya’s position as a sovereign debt issuer in the international capital markets.

CS Yatani has nevertheless termed Kenya’s relationship with the IMF as cordial amidst ongoing support to cushion the country against the effects of the COVID-19 pandemic.

“Kenya like all countries represented here continues to value its cordial and strong engagement with the Fund,” CS Yatani stated.

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Story By Kepha Muiruri
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