Why IMF Has Delayed Approving Kenya's New Loan

Talks for new funding from the International Monetary Fund (IMF) have been delayed following divergent opinions on the government's securitization plan to fund infrastructural projects

As revealed by Treasury CS John Mbadi to Reuters, the IMF wants the securitization to be considered as public debt.

The government, on the other hand, thinks that the securitization should not be considered as public debt, given that they are selling a right to a special-purpose vehicle (securitized funds).

Mbadi added that more talks had been scheduled to enable the government to continue with its talks with the IMF.

“Once you sell a right to a special-purpose vehicle and there is no risk to the government, then we shouldn’t treat it as debt. But the IMF feels we should treat it as debt. Whichever way, we will agree,” the CS told Reuters.

Kenya has already securitized funds such as the Road Maintenance Levy, which is collected from fuel sold to motorists. 

As a result, the Kenya Roads Board securitized the Ksh12 per litre from the Road Maintenance Levy to repay Ksh300 billion in pending and future infrastructure bills for road projects.

In the sports sector, the government securitized the Ksh22.7 billion annual Sports Fund for the construction of the Talanta Stadium.

Meanwhile, there are plans to raise Ksh541 billion through securitized bonds to fund the extension of the Standard Gauge Railway (SGR) to Malaba and the expansion of Jomo Kenyatta International Airport (JKIA). 

The Rail Development Levy has been earmarked for securitization for the SGR project. On the other hand,  the Air Passenger Service Levy will be securitized to raise funds for the JKIA expansion.

Should the IMF's push sail through, Kenya's debt portfolio is expected to increase. As of September 30, Treasury documents show that Kenya's debt stood at Ksh12 trillion.

Out of which, domestic debt stock was Ksh6.6 trillion while the external debt stock was Ksh 5.3 trillion.

Kenya owes the IMF Ksh477 billion, with the new funding earmarked to support government projects across the country.

“The IMF staff team made progress in taking stock of the latest macroeconomic and financial sector developments, assessing the economic outlook, and holding initial discussions with the Kenyan authorities and other stakeholders on a reform agenda that could pave the way for an IMF-supported program. 

"The policy priorities include measures to enhance fiscal policy credibility, ensure sustainability of public finances and debt, and minimize fiscal, financial, and external sector risks as well as ways to enhance governance, transparency, and efficiency in the public sector," Ithe MF noted after the recent visit to Kenya.