Kenya and Tanzania have increased their foreign debts after both countries received approvals for new loans worth over $1.2 billion. The East African countries received confirmation from the International Monetary Fund (IMF) to disburse the loans.
The IMF has agreed to give an additional sum of $235.6 million in loans to Kenya, and loans worth $1 billion to Tanzania.
Both countries received the approvals and confirmation after the Executive Board of the International Monetary Fund (IMF) completed its third review under the 38-month arrangements under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) arrangements.
After the review, the Board reached an agreement to disburse the sum of $235.6 million to Kenya immediately. According to the government of Kenya, the funds are to be used for budget support to fund capital projects and operational costs.
Official records place the total loan disbursement for budget support to Kenya at $1.21 billion. This is more than 50 percent of the total available facility of $2.34 billion under a 38-month program approved in April 2021.
In a statement, the IMF said that “Despite the resilient economic recovery, the program remains subject to downside risks, including from deeper disruptions from the war in Ukraine, unsettled global market conditions, and an increase of food insecurity.
“Continued steadfast commitment to prudent policies and advancing structural reforms remains essential to maintain macroeconomic stability and safeguard Kenya’s positive medium-term prospects,” it added.
Critics have faulted the decision of the Uhuru Kenyatta-led government to seek more loans, especially as the country is struggling to service existing ones. Kenya is at high risk of debt and currently battles an existing $84.4 billion debt ceiling.
However, in defense of the Kenyan authorities, the IMF has said that the loan facility was necessary as the country continues to battle the effects of the COVID-19 pandemic. It also cited the decline in the value of global stock values due to the war in Ukraine as the reason that necessitated the loan request.
“Kenya’s EFF/ECF arrangements for a total of SDR 1.655 billion aim to support Kenya’s program to address debt vulnerabilities, the authorities’ response to the COVID-19 pandemic and global shocks resulting from the war in Ukraine, as well as to improve governance and support broader economic reforms”, the international body said it its statement.
In the same vein, the Board of the IMF also approved a loan facility of about $1,046.4 billion for Tanzania, with about $151.7 million to be disbursed immediately.
In another statement, the IMF said that the 40-month financing package would assist Tanzania’s economic recovery, address the spillovers from the Russia-Ukraine conflict, help preserve macroeconomic stability, and support structural reforms toward sustainable and inclusive growth.
What are your thoughts, especially as critics have become more vocal against the decisions of African leaders to increase the debt status of their countries?