The International Monetary Fund (IMF) has reached an agreement with the Kenya government for a loan amounting to Ksh 74.57 billion.
The credit assistance is expected to help President William Ruto’s administration build economic resilience amid debt pressure and revenue shortfalls.
The latest support from the IMF is the fifth review under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements approved in 2021 to the tune of Ksh 332.91 billion ($2.43B) at the current exchange rate.
Kenya will also receive additional Ksh 74.57 billion ($544M) from the lender under the Resilience and Sustainability Facility (RSF) arrangement bringing the total assistance under the three facilities to Ksh 482.24 billion ($3.52B), a Ksh 149.3 billion increase.
“Upon completion of the fifth reviews by the IMF Executive Board, Kenya would have immediate access to bout Ksh 56.17 billion ($410M) including from the augmentation of access under the ECF/EFF. This would bring total IMF financial support disbursed under the EFF and ECF arrangements to about Ksh 276.32 billion ($2.017B). With the EFF/ECF augmentations and the RSF support, the total IMF commitment under these arrangements would be about Ksh 482.24 billion ($3.52B),” said Haimanot Teferra who led the IMF staff team.
During the staff meeting with Kenyan authorities earlier this month, IMF agreed to extend EFF/ECF support by 10 months to April 2025, a move the multilateral lender says will give enough time to meet programmes objectives.
The extension stems from Kenya’s request for a new 20-month RSF arrangement that will run in parallel with the EFF/ECF arrangements until April 2025, IMF said.
While Kenya’s economic outlook in the medium-term is expected to remain favourable, IMF says there still significant challenges amid slow global economic growth and tight monetary conditions.
“While agricultural output is expected to improve and food prices to come down on increased rainfall, the tighter fiscal and monetary environment to maintain macroeconomic stability will continue to weigh on growth in the year ahead,” added Teferra.
The lender backed government’s spending terming it prudent as Kenya seeks to further reduce the fiscal deficit from the current 5.7pc to 4.1pc of GDP in the FY2023/24.
As the government embarks on fiscal consolidation, IMF expects funding cut for some loss making state owned enterprises.
“It will also be important to make inroads on the agenda to reform state-owned enterprises and stop the drain on budget resources stemming from, among others, Kenya Airways and Kenya Power and Lighting Company. The policy actions underway in these areas will take some time to bear fruit but will support what remains a favorable medium-term outlook for the Kenyan economy,” said IMF.
The new loan is still subject to approval by the IMF management and consideration by the Executive Board.