PUBLIC DEBT

IMF's Sh255bn loan facility to Kenya elicits storm

Citizens question why government is heavily reliant on loans

In Summary
  • Kenyans wondered why the IMF approved the loan request even when it was obvious that the country is already burdened with debt.
  • According to the 2021 Budget Policy Statement, Kenya's public debt as of June 2020 stood at Sh7. 6 trillion, equivalent to 65 per cent of GDP.
The International Monetary Fund logo is seen at the IMF headquarters building during the 2013 Spring Meeting of the International Monetary Fund and World Bank in Washington, April 18, 2013. Photo/REUTERS
The International Monetary Fund logo is seen at the IMF headquarters building during the 2013 Spring Meeting of the International Monetary Fund and World Bank in Washington, April 18, 2013. Photo/REUTERS

The announcement by the International Monetary Fund on Friday that it had approved a Sh255 billion loan for Kenya has elicited a storm among some Kenyans.

Majority of Kenyans wondered why the IMF approved the loan request at a time the country is already burdened with debt.

It was on Thursday, just a day before the loan was approved that the latest study by Infotrak suggested that most regions are opposed to the government appetite for foreign loans, the President Uhuru Kenyatta's backyard being the most resentful.

The survey said 81 per cent of Kenyans feel anxious, fearful or angry because of the debt burden.

According to the 2021 Budget Policy Statement, Kenya's public debt as of June 2020 stood at Sh7. 6 trillion, equivalent to 65 per cent of GDP.

Former Mukurweini MP Kabando wa Kabando said the country had gone back to the days of Kanu when the government was dependent on loans.

“We are back to Moi’s Kanu regime under IMF/WB structural adjustment programs which retired President Kibaki ended to finance our budget 93 per cent from local recourses,” he stated.

Narok Senator Ledama Olekina wondered why the government had acquired an additional to mitigate the effects of the Covid-19 pandemic when counties got so little from loans secured earlier.

“Why did Kenya borrow Sh214 billion to fight Covid-19 yet only Sh7 billion was sent to the 47 County Governments in total?” he posed.

Nominated MP Millicent Omanga was equally not impressed with the announcement.

“I understand tumefuliza another Sh255 billion. Bonge la rais,” she stated.

Paka Mkareketwa, a Kenyan on Twitter said the IMF should not have approved the loan since the country is already debt-burdened.

"Please IMF, have mercy on us as Kenyans. We are suffering. Giving us such loans will make even coming generations suffer. Coming generations should not suffer due to our mistakes of voting. Have mercy on unborn kids,” he said.

On Friday, IMF had announced Kenya would receive Sh255 billion to support Covid-19 response and address an urgent need to reduce debt vulnerabilities

It is the country's second loan program from the IMF in under one year having received Sh80.6 billion in May last year to mitigate the effects of the Covid-19 pandemic.

Kenya will use the new loan to curb the Covid-19 pandemic and reducing debt vulnerabilities. IMF will offer the loan in instalments for three years.

Approval of the loan under the fund’s Extended Credit Facility and Extended Fund Facility, ECF/EFF, will enable the immediate disbursement of Sh33.5 billion which can be used for budget support.

IMF said Kenya’s loan remains sustainable, but the country is at high risk of debt distress and urged authorities to focus on urgent structural policy challenges.

“The Kenyan authorities have demonstrated a strong commitment to fiscal reforms during this unprecedented global shock, and Kenya’s medium-term prospects remain positive,” IMF deputy managing director, Antoinette Sayeh, said in a statement.

While addressing a news conference on Tuesday, CBK Governor Patrick Njoroge said he expected the new facility to anchor the government’s ongoing fiscal consolidation plan following interruptions from the pandemic.

“The bottom line is that the programme will support our Covid-19 response and budget support. It anchors fiscal consolidation through revenue driven policies which minimise debt vulnerabilities. This is the key element of the program,” he said.

-Edited by Sarah Kanyara