IMF Raises Alarm Over Kenya’s High-Interest UAE Loan
IMF warns Kenya's Ksh. 194 billion loan from UAE could worsen debt distress. Urges caution as public debt surpasses Ksh. 10 trillion. Learn how this high-interest deal could affect Kenya’s economy.
The International Monetary Fund (IMF) has expressed serious concerns about Kenya's plan to borrow Ksh. 194 billion ($1.5 billion) from the United Arab Emirates (UAE), warning that this move could significantly exacerbate the country's risk of debt distress. With Kenya's public debt already surpassing Ksh. 10 trillion, the IMF has urged the government to carefully evaluate the potential impact on its fiscal and debt management strategies.
The loan, offered at an 8.25% interest rate over a seven-year term, would strain Kenya’s ability to meet its repayment obligations, especially as it faces foreign exchange risks and budget deficits. The IMF emphasized that Kenya must align any new borrowing with a comprehensive fiscal plan to address these vulnerabilities.
To mitigate the debt risks, the Kenyan government has decided to stagger the loan disbursement, with the first tranche of Ksh. 90 billion expected in early 2025. This strategy aims to stay within borrowing thresholds set by the IMF, which has previously approved a Ksh. 464 billion loan facility to help stabilize Kenya's economy. However, the IMF remains concerned that the high cost of the UAE loan could undermine these efforts, as concessional financing from institutions like the IMF and World Bank typically carries lower interest rates.
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