CS Mbadi Warns of Kenya’s Worst Fiscal Period, Anticipates EU Funding Cuts
Treasury Cabinet Secretary John Mbadi has issued a stark warning about Kenya’s deteriorating fiscal outlook, cautioning that the country could soon face additional financial strain following the United States’ suspension of all foreign assistance through USAID.
Speaking on Tuesday at the launch of the Anti-Corruption Strategic Guiding Framework for Kenya’s justice sector in Nairobi, Mbadi revealed that the government expects the European Union (EU) to follow suit, further tightening Kenya’s access to foreign aid.
Kenya Forced to “Look Inward”
With growing concerns over high debt-servicing costs due to excessive domestic and external borrowing, Mbadi emphasized that Kenya must shift its focus towards self-sufficiency.
“We will be left to look inward, and this is the worst period for Kenya. Some time back, we decided to take loans as a country, and these loans have now reached their peak,” Mbadi stated.
Kenya is currently grappling with a Ksh 10 trillion debt burden, with two-thirds of the national revenue going towards debt servicing.
Impact of USAID and EU Funding Cuts
Kenya was one of the biggest recipients of U.S. aid in Sub-Saharan Africa, alongside Ethiopia, South Sudan, and Nigeria. A significant portion of these funds was allocated to health and humanitarian assistance, particularly for HIV/AIDS and Malaria response programs.
Beyond the U.S., the EU has been a crucial source of humanitarian aid and development funding for Kenya. The anticipated funding cuts would deal a severe blow to key sectors reliant on external assistance.
IMF Loan Review Ditched
Adding to Kenya’s economic woes, the country recently agreed with the International Monetary Fund (IMF) to abandon the ninth and final review of its current lending programme, which was set to expire next month. This means that Kenya will forgo an additional $800 million that was part of the financial support programme initiated in April 2021.
Despite speculation that Kenya failed to meet IMF requirements, Mbadi denied that the government abandoned the review due to unmet targets.
Kenya’s Mounting Debt Burden
CS Mbadi further disclosed that Kenya currently holds Ksh 5.09 trillion in manageable loans, but is also burdened with Ksh 1.0 trillion in expensive loans. Among these is a Ksh 665 billion loan from China, borrowed between 2014 and 2019, which remains a significant financial challenge.
“With our local debts, I won’t discuss them in detail, but we keep retiring them. Regarding external borrowing, we have a mix of cheap and expensive loans, and we are actively managing them,” Mbadi explained.
What Next for Kenya?
With dwindling international support and a shrinking fiscal space, Kenya’s government now faces an urgent need for economic restructuring.
The Treasury’s focus will now be on enhancing domestic revenue collection, implementing strict public spending measures, and seeking alternative financing
In other news: MPs Battle to Secure CDF Funds Before Court Deadline
CS Mbadi Warns of Kenya’s Worst Fiscal Period, Anticipates EU Funding Cuts