IMF’s new debt rules put Kenya’s floods, droughts under the spotlight
Kenya’s floods, droughts and other extreme weather events could play a bigger role in how the country’s public debt risks are assessed under a revamped International Monetary Fund (IMF) framework expected to become operational in the second half of 2027. The proposed changes would strengthen the way the IMF and World Bank test low-income countries […]
The International Monetary Fund (IMF) is set to implement a revamped framework for assessing low-income countries' public debt risks, with a focus on extreme weather events such as floods, droughts, and heatwaves. Kenya, among 25 other low-income countries, is included in the new natural-disaster stress test starting in the second half of 2027.
The IMF’s proposed method would evaluate the impact of a "one-off catastrophe" on a country's debt position, using losses at a 1 per cent exceedance probability level measured as a share of GDP. The test aims to strengthen the identification of vulnerable countries by recalibrating the macroeconomic effects of disasters. For Kenya, this would involve a more structured assessment of potential economic shocks, including disruptions to exports and pressure on public finances.
The revised approach also introduces a new long-term climate module that would assess how physical climate risks and government responses affect debt sustainability over time. The IMF's goal is to make debt assessments more comprehensive and forward-looking, accounting for long-term challenges like climate adaptation and the potential fiscal costs and benefits of climate policy.
Written by urgent.news from People Daily Kenya's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
