By O’brien Kimani/Reuters
The International Monetary Fund has approved an emergency credit facility of 150 billion shillings to be drawn by the Kenyan government in case of forex markets volatility.
The IMF however cautioned the National Treasury to only draw the cash in case of exogenous shocks that may lead to an actual balance of payments need.
The credit facility agreement runs for two years and the fund has immediately availed 75 billion shillings while the remaining portion will be released once the first portion is exhausted.
In the last five years, the International Monetary Fund has been having arrangements with the Kenyan government to avail millions of dollars to the National Treasury incase of dollar shortages in the country.
Last year, the lender and Kenya had agreed on a 70 billion shillings year-long facility that expired in January this year to cushion the country against any external or internal shocks.
“The Kenyan authorities have indicated that they will continue to treat both arrangements as precautionary,” the IMF said after the completion of discussions with Kenya on replacing existing facilities.
The IMF said Kenya only intended to draw on them if it faced “exogenous shocks” that led to a balance of payments need.
The fund reckons that after examining all the micro and macro economic factors, the Kenyan government has put enough measures to facilitate economic growth with minimal disruptions.
The IMF says Kenya’s fiscal deficit is expected to reduce by 3 percentage points of gross domestic product over the next two years.
The National Treasury targets annual economic expansion of 10 percent, accelerating from the current average of 5 percent to 6 percent.
The agreement comprises 100 billion shillings of a standby arrangement and a 50 billion shillings standby credit facility, both for two years.
Kenya is now entitled to access about 76 billion shillings of the total credit facility, with the remainder available in four portions upon completion of semi-annual reviews.