Kenya has submitted an economic repair plan to the International Monetary Fund and it expects the fund’s board to review it for approval at a meeting at the end of August, the country’s chief minister has said.
Kenya has been forced to rapidly draw up new spending cuts after widespread youth-led protests against tax hikes previously put forward by President William Ruto’s government left at least 50 people dead.
“The Treasury has had a very robust engagement with the International Monetary Fund, even in the midst of the challenges we have been facing,” Musalia Mudavadi, the chief minister, told parliament’s budget committee in remarks seen by Reuters on Tuesday.
He said the government has presented its economic policies and programmes plan to the fund, and it will be considered by the IMF board at the end of August.
“It is our desire and hope that Kenya’s proposition will receive favourable consideration so that we can move beyond the challenges that we are facing,” Mudavadi told the panel of lawmakers.
What is the debt situation in Kenya?
When Ruto entered office in August 2022, Kenya was already in a crisis. Its external debt was about $62bn, or 67 percent of its gross domestic product.
Former President Uhuru Kenyatta had borrowed heavily from commercial lenders and countries like China to finance huge infrastructure projects, including a rail line that links Nairobi to the port city of Mombasa and 11,000km (nearly 7,000 miles) of tarmacked roads.
Most of those loans were commercial, meaning they had high interest rates. Meanwhile, the infrastructure failed to generate the expected revenue.
Inflation pressures from COVID-19 also lingered. Added to that were the supply chain disruptions in agriculture in Kenya that followed Russia’s invasion of Ukraine. All these combined meant food and the general cost of living were soaring in 2022 and so were Kenya’s debts as interests accumulated.
Currently, its debt has reached $82bn, about $8bn of which is owed to China. Other creditors include the IMF, the World Bank, the United States and Saudi Arabia. The debt also includes domestic borrowing. More than half of government revenue goes towards debt repayments.
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