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IMF Cautions Kenya on Rising Debt

IMF Cautions Kenya on Rising DebtIMF Cautions Kenya on Rising Debt

The International Monetary Fund has cautioned that Kenya’s rising debt needs to be contained to avoid vulnerabilities to the economy from unforeseen shocks.

IMF Resident Representative in Kenya Jan Mikkelsen said that while the economy had shown resilience to drought and prolonged electioneering this year, the rising public debt was a concern and needs to be checked to avoid dragging down the economy in future, AllAfrica reported.

Kenya’s public debt has been on an upward trend in recent years, rising to Sh4.4 trillion ($42.59 billion) by the end of September from less than a trillion shillings in mid-2014.

Mikkelsen said the country requires clear policies to address “debt vulnerability”, which could increase further if treasury pursues another syndicated loan and a second eurobond as indicated by Treasury Secretary Henry Rotich two weeks ago.

“The fiscal deficit needs to be reduced a little bit to make more room for the private sector and also to reduce the public debt pressure,” he said. “We still do see growth in the Kenyan economy, which is quite resilient. It will of course assume that political stability returns to the country.”

A Budget Review and Outlook Paper released in September showed that the level of public debt to gross domestic product ratio was expected to rise to 59% this fiscal year, from a previous target of 51.8%. The fiscal deficit was at 7.9% from a previous forecast of 6.2%.

The official said an IMF mission would visit Nairobi in mid-December to review its programs with the government. The international lender has a stand-by credit facility worth $1.5 billion with Nairobi that the Kenya government can draw from in case of significant external shocks.

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