The International Monetary Fund (IMF) executive board has approved the release of an additional $407 million budgetary support for Kenya after being satisfied with the government’s commitment to socio-economic and structural reforms under its 38-month financing programme with the East African nation.
In a statement Wednesday the Fund said the Board’s decision allows for an aggregate immediate disbursement of $407 million, bringing Kenya’s total disbursements for budget support under the under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) programme to about $714.5 million.
In April this year IMF Board approved a $2.34 billion three-year financing package for Kenya to support the government’s next phase of the Covid-19 response, enhance governance and reduce debt vulnerabilities while safeguarding resources to protect vulnerable groups.
As part of the review, the board was satisfied that Kenyan authorities are showing strong commitment to their reform agenda in challenging circumstances and are acting to reduce debt vulnerabilities while maintaining support for the economic recovery.
“The Kenyan authorities continue to demonstrate strong commitment to their fiscal reform agenda during this unprecedented global shock. Performance under the EFF/ECF arrangements has been broadly satisfactory despite a challenging environment,” said Antoinette Sayeh, IMF’s Deputy Managing Director and Acting Chair of the Executive Board.
“Maintaining momentum on the structural reform agenda is important. The very substantial progress made in assessing the financial situations of state-owned enterprises (SOEs) that pose the largest fiscal risks provides a solid basis for identifying least-cost approaches to address their financial challenges, and should be complemented with efforts to improve oversight and management of SOEs more broadly,” added Ms Sayeh.
According to IMF Kenya’s debt indicators, such as debt service as a share of exports and revenues, have worsened due to the Covid-19 shock, and fiscal adjustment under the new three-year programme are expected to reduce debt-related risks and put debt as a share of GDP firmly on a declining path by the end of the arrangements.
Kenya was hit hard at the onset by the Covid-19 pandemic, with the economy contracting to 0.1 percent in 2020 from 5.4 percent in 2019.
According to the IMF, Kenya’s debt remains sustainable but it is at high risk of debt distress.
In May last year the Fund approved the disbursement of $739 million to be drawn under the Rapid Credit Facility (RCF) to support the government’s response to the Covid-19 pandemic.