Kenya is expected to receive a $1.5 billion (at least Ksh 193 billion) loan from the United Arab Emirates (UAE) within the next seven days, a report by Bloomberg indicates.
According to Bloomberg, the financing will be provided in a lump sum, reversing the earlier plan to stagger the loan, according to two individuals familiar with the discussions who requested anonymity as the talks are private.
Kenya turned to the UAE in September last year to plug the country’s financial shortfall.
The loan will have an interest rate of around 8.2%, lower than the current yields on Kenya’s sovereign bonds.
“Kenya is diversifying its sources of budget support,” a source told Reuters then.
Bloomberg had also reported earlier on, September 25, that Kenya was in talks for a loan deal with Abu Dhabi, the capital of UAE.
Kenya has been struggling to find new sources of financing after deadly protests in June and July 2024 forced President William Ruto to withdraw the controversial Finance Bill 2024 that had targeted additional revenue of more than Ksh346 billion ($2.7 billion) in June.
The country secured a four-year loan agreement with the International Monetary Fund (IMF) in 2021 and committed to borrowing in May 2023 to support climate change initiatives, bringing its total IMF loan access to $3.6 billion (Ksh 426 billion).
Further, in June 2024, Kenya reached a staff-level agreement with the IMF for the seventh review of its program.
Also Read: Atwoli Warns Mbadi Over IMF Loan Conditions
Kenya Seeks Loan from UAE after IMF Delays
However, delays in funding from the IMF worsened the situation. The government is awaiting a long-overdue $600 million (Ksh 77 billion) IMF program disbursement and is reportedly in urgent need of funds.
The then US Ambassador to Kenya, Meg Whitman August 28 revealed that the loan approval that was to happen on June 12 was cancelled because the government went against the Fund’s agreement by withdrawing the controversial bill.
“The IMF was going to approve a disbursement around June 12 but when the Finance Bill got pulled down, they could no longer do it,” Meg Whitman noted.
“I believe it is important for that disbursement to be given out because Kenya faces a very difficult situation.”
As a result, Kenya has budget deficit has hit 4.3% of the gross domestic product for the current fiscal year through June from an initial 3.3% pre-protest budget, potentially breaching IMF-program targets.
To address the funding gap, the government plans to secure approximately $2.8 billion ( Ksh 359.8 billion) in foreign loans and borrow $3.2 billion (Ksh 411.2 billion) from the local market.
Also Read: IMF Dispatches Special Team to Kenya for Mission; Details of Visit
IMF Issues Update on New Policies
After a six-day visit to Kenya, an IMF staff team issued an update on the formation of policies that will manage financial challenges in the country.
According to the IMF, discussions held with the Kenyan government revolved around policies and reforms to address the subsequent evolving economic and fiscal challenges.
“The Kenyan authorities and IMF staff had productive discussions on the authorities’ policies and reforms to address the evolving economic and fiscal challenges,” said Team leader Haimanot Teferra.
Haimanot Teferra has said that the IMF is on track and is supporting Kenya in identifying a set of policies that could support the completion of the reviews under the ongoing program and partnerships.
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