IMF review fails for Kenya, resulting in forfeiture of $850M disbursement
In a surprising turn of events, Kenya has declined a disbursement worth $850 million under its current deal with the International Monetary Fund (IMF). The declined disbursement is part of the current $3.6 billion Extended Fund Facility (EFF) and Extended Credit Facility (ECF) that Kenya secured from the IMF in 2021.
While the specific reasons for the withheld disbursement are not explicitly stated, the situation may be linked to broader issues with meeting international lenders’ conditions. For instance, the World Bank has suspended a major governance reform loan due to the Kenyan government’s failure to implement key reforms.
The IMF typically withholds disbursements when a borrower fails to meet agreed-upon structural or policy benchmarks. These often include fiscal consolidation, governance reforms, or public financial management improvements. In the context of Kenya, the country has faced challenges in areas such as fiscal consolidation, structural reforms, and social spending safeguards.
Kenya has been grappling with high public debt and budget pressures, ongoing education policy debates, and vaccine shortages, among other challenges. These issues reflect systemic governance and public finance challenges that international lenders often consider when evaluating a country’s reform commitment.
To secure a new IMF deal or resume disbursements, Kenya will need to demonstrate tangible progress on agreed structural, governance, and fiscal reforms, with a clear plan to address the IMF’s concerns in these areas. This could involve passing legislation, implementing institutional changes, or meeting fiscal targets that were previously agreed upon but not fulfilled.
As Kenya navigates these challenges, it is seeking a fresh deal with the International Monetary Fund, which serves as a lender of last resort. The IMF's Extended Credit Facility program is designed to cater to countries that spend considerably more money than the revenue they generate and need to borrow to finance their budget.
References:
[1] World Bank Suspends Loan to Kenya Over Governance Reform Delays. (n.d.). Retrieved from https://www.reuters.com/world/africa/world-bank-suspends-loan-kenya-over-governance-reform-delays-2021-12-03/
[3] Kenya Faces Vaccine Shortages and Rising Public Health Risks. (n.d.). Retrieved from https://www.aljazeera.com/news/2021/12/16/kenya-faces-vaccine-shortages-and-rising-public-health-risks
[5] Mariblock Kenya Fails IMF Review, Forfeits $850M Disbursement. (n.d.). Retrieved from https://www.msn.com/en-us/money/companies/mariblock-kenya-fails-imf-review-forfeits-850m-disbursement/ar-AAOY91T?li=BBnbfcU
- Kenya's current financial situation and future disbursements from the IMF could be influenced by progress in areas such as crypto, DeFi, and traditional finance, as they are often linked to broader issues of fiscal consolidation and public financial management.
- The ongoing decline in business and general-news reporting on Kenya highlights the importance of addressing concerns related to governance and reforms, as these factors can impact the country's ability to secure funding for projects, including those in the crypto and DeFi sectors.
- In light of the recent decline of an $850 million disbursement, Kenyan politicians may need to work closely with international lenders and the public to address concerns related to politics, governance, and business practices, as these issues can impact the country's reputation and ability to seek additional funding in the future, including in emerging sectors like crypto and DeFi.
