The International Monetary Fund (IMF) has finally approved the much-delayed $606 million (Sh78.8 billion) loan to Kenya paving the way for the release of the funds.
The funding is part of $3.6 billion (Sh468 billion) facility that the country has been drawing from the international lender since 2021.
In a statement, the lender stated that the fund is aimed at helping Kenya’s efforts to rebuild fiscal and external buffers, including enhancing resilience to climate shocks.
It has acknowledged that the country faces a difficult balancing act of boosting domestic revenues to protect critical spending in priority areas while meeting heavy debt service obligations.
Delivering on this, it however, said, would call for improving governance and transparency to restore public trust in the effective use of public resources.
“Executive Board concluded today the seventh and eighth reviews under the extended arrangement under the Extended Fund Facility (EFF) and the Extended Fund Facility (EFF) approved in 2021 and a review under the Resilience and Sustainability Facility (RSF) arrangement approved in July 2023,” the statement dated October 30 reads.
The funds will now come in two tranches with the initial amount being $485.8 million (Sh63 billion) under the EFF/ECF arrangements.
Under the RSF arrangement, the country will draw $120.3 million (Sh15.6 billion).
The board at the same time approved a reduction in the total access under the EFF/ECF arrangements from exceptional access, approved in January 2024 to within the normal access limits and a rebalancing of access toward the zero-interest ECF arrangement.
“Together with the recent changes to IMF’s charges and surcharges policy, these adjustments would lower Kenya’s interest payments to the IMF,” it states.
The lender approved $941 million (Sh122.3 billion) in January.
In completing the reviews, the board recognised that the resolution of the exceptional external financing pressure earlier this year has revived market confidence, supporting shilling stabilization and facilitating faster buildup of reserves.
Fiscal consolidation efforts have continued to face headwinds following the tax revenue shortfall in FY2023/24 and the withdrawal of the Finance Bill, 2024.
Under the EFF/ECF arrangements, total IMF financial commitment stands at $3.61 billion (Sh468 billion) of which $3.12 billion (Sh405 billion) has been approved for disbursement.
For the RSF arrangement, the corresponding amounts are about $541.3 million (Sh70 billion) and $180.4 million (Sh22.4 billion)respectively.
“Kenya’s economy remains resilient, with growth above the regional average, inflation decelerating, and external inflows supporting the shilling and a buildup of external buffers, despite a difficult socio-economic environment,” IMF’s First Deputy Managing Director of the IMF and acting chair Gita Gopinath said.
