IMF and World Bank call for suspension of lending to Kenya

A human rights organization is now demanding that international lenders stop granting further loans to the heavily indebted Kenyan government.

The International Center for Policy and Conflict called on the International Monetary Fund, the World Bank and other lenders to stop their support until the current debt level is examined.

“All lenders, both domestic and foreign, must immediately stop lending to the Kenyan government until the independent forensic audit is completed,” said ICPC Executive Director Ndungu Wainaina.

In a statement on Friday, Wainaina called on creditors to initiate a comprehensive independent audit of the country’s domestic, foreign, soft and commercial debt.

“While the independent debt review is ongoing, development partners that support certain essential service sectors can continue their support to those sectors,” he said.

The audit should also cover the total amount of state guarantees for all state-owned enterprises and authorities in order to understand exactly what happened to the borrowed money.

“To ensure the transparency of an independent forensic audit, it is important that the process of identifying the auditing authority is made public,” he said.

In addition, Wainaina said the state budget for 2024-25 must be completely revised and a new budget prepared in strict compliance with the Constitution and budget laws.

The country is overwhelmed by debt and can no longer take out any more loans.

Kenya’s debt currently stands at 11.2 trillion shillings, or 67 percent of the country’s gross domestic product (up from 46 percent in 2010).

“Debt service payments represent 63 percent of ordinary revenues and interest repayments have increased to 30.1 percent of ordinary revenues,” he said.

He wants the government to consider entering into negotiations to restructure some bonds and loans for a period of at least five years.

“It is no longer sustainable to rely solely on fiscal adjustment with supplementary financing from the IMF and World Bank,” he said.

Because of this enormous debt, citizens cannot see or perceive any immediate improvement in their standard of living.

“Kenya is facing significant debt problems that are driving the economy into the abyss. The debt is causing unacceptable economic and financial hardship to Kenyans. The country may be facing default, if it is not there already,” he said.

Citing reports from the Parliamentary Budget Office, Wainaina estimated that the economy was at real risk of a liquidity crisis.

This is demonstrated, he added, by the government’s inability to meet its essential development and service delivery obligations.

“The country’s economic crisis is the result of wasteful fiscal policies financed by borrowed and stolen, unexplained and illegal debts,” he said.

Key indicators of debt sustainability, including debt service to government revenue and debt to GDP ratios, are causing serious concern.

Tax revenues, he added, were falling despite high taxes and debt repayments were rising alarmingly.

“Unpredictable exchange rate fluctuations, adverse fiscal conditions and natural disasters are making the situation more risky by the day,” Wainaina said.