NAIROBI: The International Monetary Fund said Thursday it had agreed a $938-million loan for Kenya, which is grappling with a liquidity problem and historically high debt levels.

East Africa’s economic powerhouse is facing a host of challenges, including depleted government coffers, skyrocketing inflation and a plunging currency that has sent debt repayment costs soaring.

The impact of the Covid pandemic as well as the Ukraine war and a record drought in the Horn of Africa region have all taken a serious toll.

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The nation of some 53 million people had accumulated more than 10.1 trillion shillings ($66 billion) in debt by the end of June, according to Treasury figures, equivalent to around two-thirds of gross domestic product.

Kenya also has a $2-billion eurobond repayment due next year.

“This uncertainty is exerting substantial pressure on liquidity, primarily due to the sizeable eurobond maturing in 2024,” the IMF said in a statement.

President William Ruto has said Kenya will pay the first instalment of the eurobond repayment worth $300 million next month.

The new loan deal must still be approved by an IMF board meeting in January.

It would immediately unlock $682 million for Kenya, the IMF said.

“The economy has displayed resilience, with real GDP expanding by 5.4 percent in the first half of 2023, primarily due to a robust recovery in the agriculture sector following the return of rains,” it added.

Overall inflation remains stubbornly high, at an annual rate of 6.9 percent in October, and food and fuel prices have continued to climb.

The cost of servicing public debt, mainly to China, has soared as Kenya’s currency has slumped to record lows.

Ruto has introduced a range of new and increased taxes to help replenish government coffers, despite pledging during last year’s election campaign to help ease the financial hardship of ordinary Kenyans.