IMF approves Sh150 billion loan for Kenya

The International Monetary Fund (IMF) has approved a $941 million (Sh150 billion) lending boost to Kenya, with an immediate disbursement of $624.5 million to Kenya.

The disbursement announced on Thursday under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) programs will also be topped by a release of $60.2 million under the Resilience and Sustainability Facility (RSF) arrangement.

The ECF approved in April 2021, was extended by 10 months in July 2023 to April 2025, and the first review under the 20-month Resilience and Sustainability Facility arrangement was approved in July 2023.

The Executive Board sign-off brings the IMF's total funding commitment to Kenya under all three facilities to more than $4.4 billion.

In completing the reviews, the Executive Board also approved the modification of program conditionalities, waivers of nonobservance of the continuous performance criterion on no new accumulation of external arrears and the end-June 2023 and end-December 2023 tax revenue targets considering the corrective actions taken by the authorities, and waiver of applicability for all other end-December 2023 performance criteria.

According to the IMF, the Kenyan economy remains resilient against a challenging global backdrop even as it recovers from the legacy of the COVID-19 pandemic and the worst multi-season drought over the past two years.

Economy expansion

The Kenyan economy expanded by 5.6 percent in the first nine months of 2023, driven by a strong recovery in agriculture which also helped lower both overall and food inflation.

“Kenya’s growth remained resilient in the face of increasing external and domestic challenges. The EFF/ECF and RSF arrangements continue to support the authorities’ efforts to sustain macroeconomic stability, strengthen policy frameworks, withstand external shocks, push forward key reforms, and promote more inclusive and green growth," the IMF said in its statement.

“Kenya’s performance under the ECF/EFF arrangements have been mixed with adherence to quantitative targets being broadly satisfactory. The authorities have made welcome progress in some key areas, including governance and public financial management. Continued implementation of corrective measures to address missed targets and accelerated reforms will be important."

IMF said the Kenyan Government's commitment to fiscal consolidation while protecting essential social and developmental spending should support efforts to bring down the debt burden toward the new debt anchor of 55 per cent of GDP in present value terms by 2029.

“The Monetary policy has demonstrated its ability to react to inflation shocks and anchor expectations. The Central Bank of Kenya should continue to act decisively to ensure that inflation converges firmly to the target. Strengthening the monetary policy framework would support price stability and external sustainability. The exchange rate should be allowed to respond flexibly to market conditions. The banking system is generally sound, but emerging vulnerabilities need close monitoring," IMF added.

“Unlocking Kenya’s potential and realising its positive medium-term prospects will require resolute efforts at sustaining structural reforms to support more job creation, poverty reduction, and making the economy greener and more resilient."

The recent approval follows another one last November where the IMF approved Sh142.7bn loan to Kenya.