Kenya's central bank chief Kamau Thugge isn't putting a clock on a new IMF program. In a Thursday interview held in Bangkok during the IMF Annual Meetings, he said the start date hinges on getting the two parties' views aligned on the program's design. As the world's largest shipper of black tea, Kenya would rather secure a funded IMF deal because the concessional money could displace pricier domestic borrowing.
"We don't have a balance of payments need," he said, pointing to foreign-exchange reserves equal to roughly six months of imports and a steady currency. In early December, an IMF delegation is due in Nairobi for the customary Article IV review of the economy, and to open talks on a successor program.
Last year, Kenya's $3.6 billion IMF program, planned for four years, was cut short, leaving roughly $850 million undisbursed after the country fell short of key goals such as narrowing its budget deficit and lifting tax revenue. The IMF now assesses Kenya as at high risk of debt distress and says there is limited space to lift taxes to fund a widening deficit. Earlier revenue pushes triggered deadly protests and legal challenges.
Nairobi has increasingly tapped lower-cost multilateral funds from the World Bank and IMF, and has rolled over maturing eurobonds to extend its repayment profile. Thugge said Kenya has completed the selection of banks to arrange its $5.4 billion external borrowing program running through June 2027 and can move to market quickly, though recent volatility complicates the timing. He noted Kenyan eurobond yields have risen by as much as 100 basis points since the start of last month. The price hit was evident as of 5:39 p.m. in London: dollar bonds maturing in 2038 were off by 0.57 cent at 93 cents on the dollar, leaving them among the weakest in emerging markets.
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Thugge added that Kenya has not explored a currency-swap arrangement with China. By contrast, Zambia is discussing a swap with Beijing and plans to let Chinese buyers pay for copper in renminbi, and Chinese miners there can already settle taxes in the currency.
Thugge called the Middle East crisis "the main risk" to Kenya's growth outlook. He also warned that a super El Niño, which brings flooding in the Horn of Africa, "will have a negative impact on growth." Even with those headwinds, he projected 5% growth this year and 5.3% in 2027.
For your wallet, keep an eye on December's IMF visit, how quickly Kenya taps external markets, and where eurobond yields settle. Those three shape borrowing costs, the policy mix, and the ripple effects that can show up in local inflation, rates, and asset prices.
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