Kenya to pay IMF Sh25 billion in interest and fees by April

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Cabinet Secretary, National Treasury & Economic Planning Njuguna Ndung'u on May 17, 2023. PHOTO | DENNIS ONSONGO | NMG

Kenya will pay an estimated Sh25 billion in interest and fees to the International Monetary Fund (IMF) in the 12 months ending April 2024.

The lender has revealed that it expects to earn about two percent of its lending income from Kenya in the financial year 2024, making the country one of its top revenue earners.

“Fund income from Kenya is projected to account for about two percent of total lending income in FY2024 [ending April], based on a desk survey scenario for projected programme demand as of September 2023,” said the IMF.

“Total GRA (General Resources Account) charges and fees for Kenya are projected at SDR 116 million for 2024.” SDR refers to Special Drawing Rights, a basket of currencies that includes the US dollar and Euro.

A unit of SDR is currently worth about Sh215.5. The bank’s lending income is derived from the charges it levies on the use of credit from the GRA, service charges, and commitment fees.

The IMF on Wednesday approved the disbursement of Sh110.8 billion ($684.7 million) to Kenya, increasing the size of its total lending to the country.

The approval followed the completion of the sixth review of Kenya's multi-year arrangement with the fund under the Extended Fund Facility (EFF) and Extended Fund Facility (ECF) and the first review of the Resilience and Sustainability Facility (RSF).

Kenya returned to the IMF for loans in 2020 following the outbreak of the Covid-19 pandemic that plunged the country into recession, and has since grown to become one of the IMF’s top borrowers.

As at December 31, 2023, the lender’s outstanding loans stood at $2.051 billion (Sh332 billion). This is the ninth highest in the world, only behind Ukraine, South Africa, Pakistan, Egypt, Ecuador, Colombia, Argentina and Angola.

But the bank’s increased lending to Kenya in recent years is coming with some bitter consequences to taxpayers.

The IMF has put tough structural benchmarks to its loans that the Kenyan government has to meet to unlock additional lending.

This includes discontinuation of subsidies on fuel and electricity to ease pressure on the National Treasury and free up funds for repayment of loans to both domestic and external creditors.

The lender has also proposed some tough tax measures that are biting Kenyans as a means to raise the government’s annual revenues to cut the budget deficit.

Kenya’s debt repayments have been growing rapidly in recent years with about seven out of ten shillings collected by the Kenya Revenue Authority being used to repay debt.

In the year to June 2022, Kenya paid Sh305.66 billion to repay external creditors. This includes principal payments of Sh184.53 billion and Sh121.13 billion interest.

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