The International Monetary Fund (IMF) plans to release $244 million to Kenya to finance its budget “in the coming weeks” after its staff expressed their satisfaction with Nairobi’s economic reforms in the face of Covid-19.
The IMF said its staff are satisfied with the progress that the Kenyan government is making in its economic reform programmes, and the deal now awaits endorsement by the Fund’s management and board.
Kenya will access $244 million, bringing the total IMF support in a 38-month financing facility to $1.17 billion under the Extended Fund Facility (EFF) and Extended Credit facility (ECF).
“The IMF staff team and the Kenyan authorities have reached a staff-level agreement on the third review of Kenya’s economic programme under the EFF and ECF arrangements. The agreement is subject to approval of IMF management and the Executive Board in the coming weeks. Upon completion of the Executive Board review, Kenya would have access to SDR 179.13 million (equivalent to about $244 million), bringing the total IMF financial support under these arrangements to SDR 865.77 million (equivalent to about $ 1,178 million),” said the IMF mission led by Mary Goodman.
SDR means Special Drawing Rights, an international reserve asset created by the IMF to supplement its member countries’ official reserves.
In April 2021, the IMF Board approved a $2.34 billion three-year financing package for Kenya to help support the government’s Covid-19 response, enhance governance and reduce debt vulnerabilities while safeguarding resources to protect vulnerable groups.
Between March 31 and April 22 the IMF staff engaged Kenya to discuss progress on reforms and authorities’ policy priorities in the third review of Kenya’s economic programme supported by the EFF and ECF.
In a statement on April 25, Ms Goodman said the Kenyan economy has seen a robust recovery as the effects of the pandemic wane.
“Spillover from the war in Ukraine are expected to have a modest impact on growth in the near term, as Kenya’s direct exposure to Russia and Ukraine is relatively limited,” she said.
Kenya was hit hard by the Covid-19 pandemic, with the economy contracting to 0.1 percent in 2020, from 5.4 percent in 2019.
The IMF projects a rebound to 5.7 percent in 2022, reflecting a pickup in agriculture and continued recovery in services and other sectors.
“The medium term outlook looks favourable, supported by Kenya’s proactive reform efforts, although the outlook is subject to uncertainty. Spillovers from the war in Ukraine are expected to temporarily push up inflation as domestic retail fuel prices gradually rise to global levels,” said Ms Goodman.
In May 2020, 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.
According to the IMF, Kenya’s robust programme performance is delivering resilience that is helping the country navigate these global shocks while remaining within the authorities’ targets and continuing to make progress in addressing debt vulnerabilities.