The International Monetary Fund (IMF) has warned Kenyans protesting its loans to the government that they face job cuts, tax increases and costly loans without its help.
The IMF issued a statement following public outcry over the government’s growing appetite for debt after approving a $ 2.34 billion loan to Kenya, saying its bailout has saved the country from a debt crisis amid the Covid-19 pandemic.
The IMF said the loan would help Kenya tackle Covid-19 in the short term and balance its long-term accounts by replacing expensive bank loans with concessional funding from bilateral countries and multilateral institutions.
“The arrangements with the IMF – along with additional financing from development partners and capital markets and support from the G-20 under the Debt Service Suspension Initiative (DSSI) – will help address Kenya’s significant medium-term financing needs, in particular to support their response to Covid-19. . The alternative to this financing is much sharper fiscal consolidation or much more expensive borrowing on commercial terms, ”the IMF said in a FAQ on Kenya.
The pandemic has affected Kenya’s income and limited access to commercial lending markets, forcing the country to look to the World Bank and IMF in search of direct budget financing.
Previously, Kenya had shied away from direct budget funding from institutions such as the IMF and the World Bank during the regime of former President Mwai Kibaki, with most of the support taking the form of backstopping. to projects.
However, the deterioration of the country’s cash position, marked by declining income and worsening debt service obligations, forced the country to revert to these loans with conditions.
Last year Kenya borrowed Ksh 79.3 billion (about $ 733 million) from the IMF and has now taken $ 2.34 billion under the current program.
From the World Bank, Kenya took $ 750 million in 2019 and last year, $ 50 million in emergency funding for Covid-19, a $ 43 million loan to fight locusts and a $ 1 billion budget support facility to help manage the adverse effects of the pandemic.
Kenya plans to borrow an additional $ 1.5 billion from the World Bank this year.
The pandemic only tipped the scales for the country heading into a debt crisis after President Uhuru Kenyatta’s Jubilee administration borrowed at least Ksh 6.1 trillion (about $ 56 billion) for implement his manifesto in 10 years in power after having inherited just over 1 Ksh. 79 trillion ($ 16 billion) as of June 2013.