NAIROBI, Kenya – The International Monetary Fund (IMF) has urged Kenya to exercise caution with new borrowing plans, warning that the nation’s already precarious debt situation could worsen if fiscal strategies are not carefully managed.
During a public Q&A session on Thursday, Julie Kozack, the IMF’s Director of Communications, highlighted Kenya’s “high risk of debt distress.”
Her remarks come amid reports of Kenya’s negotiations for a $1.5 billion loan from the United Arab Emirates (UAE).
“What I can say is that we assess Kenya to have a high risk of debt distress,” Kozack said. “Any new borrowing should be considered within the context of a comprehensive fiscal strategy to reduce debt vulnerabilities while addressing recent and emerging fiscal challenges.”
Kozack refrained from divulging details about the ongoing discussions with the UAE but promised that the IMF would release updates as the situation unfolds.
Kenya’s public debt has surged to approximately Sh10.6 trillion as of July 2024, with a domestic debt stock of Sh5.41 trillion.
The country faces a staggering Sh1.85 trillion in debt servicing obligations for the 2024/25 fiscal year, including Sh843.4 billion for debt redemption and Sh1.1 trillion in interest payments.
Efforts to expand the revenue base through the Finance Bill, 2024, were thwarted by public opposition, culminating in widespread protests that forced President William Ruto to withdraw the controversial proposal.
The scrapped bill had aimed to generate Sh340 billion in additional revenue.
With tax reforms still facing resistance and economic shocks looming, borrowing has become a more attractive—albeit risky—option for the government.
The IMF has made it clear that its support for Kenya’s borrowing is contingent on significant reforms.
These include increasing tax revenues, reducing subsidies, cutting government wastage, and improving governance and transparency.
The lender also emphasized the importance of reforming state-owned enterprises and maintaining fiscal discipline by balancing revenue generation with controlled spending.
“Policymakers in Kenya, like in much of the region, face a complex balancing act between pressing spending needs for priority areas—such as social programs, health, and education—and managing the rising burden of public debt,” Kozack noted.
The IMF is continuing its engagements with Kenya, with Deputy Managing Director Nigel Clarke scheduled to visit Nairobi from December 9 to 10.
Clarke’s visit is expected to involve discussions with Kenyan authorities and key stakeholders, focusing on the country’s fiscal policies and economic challenges.
During a public Q&A session on Thursday, Julie Kozack, the IMF’s Director of Communications, highlighted Kenya’s “high risk of debt distress.”
Her remarks come amid reports of Kenya’s negotiations for a $1.5 billion loan from the United Arab Emirates (UAE).
“What I can say is that we assess Kenya to have a high risk of debt distress,” Kozack said. “Any new borrowing should be considered within the context of a comprehensive fiscal strategy to reduce debt vulnerabilities while addressing recent and emerging fiscal challenges.”
Kozack refrained from divulging details about the ongoing discussions with the UAE but promised that the IMF would release updates as the situation unfolds.
Kenya’s public debt has surged to approximately Sh10.6 trillion as of July 2024, with a domestic debt stock of Sh5.41 trillion.
The country faces a staggering Sh1.85 trillion in debt servicing obligations for the 2024/25 fiscal year, including Sh843.4 billion for debt redemption and Sh1.1 trillion in interest payments.
Efforts to expand the revenue base through the Finance Bill, 2024, were thwarted by public opposition, culminating in widespread protests that forced President William Ruto to withdraw the controversial proposal.
The scrapped bill had aimed to generate Sh340 billion in additional revenue.
With tax reforms still facing resistance and economic shocks looming, borrowing has become a more attractive—albeit risky—option for the government.
The IMF has made it clear that its support for Kenya’s borrowing is contingent on significant reforms.
These include increasing tax revenues, reducing subsidies, cutting government wastage, and improving governance and transparency.
The lender also emphasized the importance of reforming state-owned enterprises and maintaining fiscal discipline by balancing revenue generation with controlled spending.
“Policymakers in Kenya, like in much of the region, face a complex balancing act between pressing spending needs for priority areas—such as social programs, health, and education—and managing the rising burden of public debt,” Kozack noted.
The IMF is continuing its engagements with Kenya, with Deputy Managing Director Nigel Clarke scheduled to visit Nairobi from December 9 to 10.
Clarke’s visit is expected to involve discussions with Kenyan authorities and key stakeholders, focusing on the country’s fiscal policies and economic challenges.
