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The International Monetary Fund (IMF) reached an agreement on a US$938 million (€864 million) loan for Kenya. This will give a reprieve to the East African country’s massive economic difficulties stemming from the foreign exchange crunch, high inflation, currency depreciation, and unemployment
The International Monetary Fund (IMF) reached an agreement on a US$938 million (€864 million) loan for Kenya. This will give a reprieve to the East African country’s massive economic difficulties stemming from the foreign exchange crunch, high inflation, currency depreciation, and unemployment.
Highly indebted Kenya was reeling under economic woes, which led to violent protests by the opposition party. The country has a total number of 53 million people; but has a total external debt of Euro 64.4 billion, making it one of the countries having the highest per capita public debt. This represents about two-thirds of the Gross Domestic Product of the country.
The East African country is staring at an economic crisis as its Eurobonds are about to mature in June 2024, necessitating the retirement of a large quantum of loans. Official figures indicate that close to US$2 billion Eurobonds are maturing by June next year. Economic analysts indicate that even with the support of the IMF, Kenya does not have the resources to retire such a large quantum of loans. They insist that Kenya desperately needs a recovery in Agriculture to reduce the huge food grain imports, necessitating considerable outgo of the foreign exchange resources. Also, the country needs a boost in its tourism sector, to ensure inflows of foreign exchange in a relatively lesser time frame. The sector had to bear the brunt of a double whammy of COVID-19 and the Russian-Ukraine war, which disrupted the tourist flows into the country.
Despite the imponderables facing the country, the Government is exuding optimism in holding the bull by the horns. President William Ruto announced that the country would repay a first tranche of US$300 million in December. If the IMF loan disbursal goes smoothly, Kenya will have immediate access to US$682 million. To back up his optimism about the economy, Ruto says that the economy is now growing at 5.4% (first half of 2023) riding on the back of a solid recovery of agriculture.
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However, inflation rules high close to 7% is a worrisome factor, jacking up the cost of living. A few nationwide demonstrations were carried out by the opposition party to give vent to the people’s ire. The government has also introduced various tax measures to mop up the resources from the people, which has compounded the public woes. Recently, Ruto was in Beijing to attend the 10th anniversary of the One Belt One Road celebrations, where he reported to have asked for a loan of US$ 1 billion from the Chinese government to tie down its immediate development needs. The response of the Chinese government to this demand is not known as yet.
