IMF approves disbursement of Ksh.29 billion to Kenya

The International Monetary Fund (IMF) Executive Board has approved the disbursement of Ksh.29.1 billion ($258.1 million) which represents the third part of a Ksh.264.4 billion ($2.34 million) loan program whose deal was struck in April this year.

The announcement by the multilateral lender follows a second round of consultation and reviews of its program with Kenya which are a prerequisite to fresh disbursements under the three-year program.

Cumulatively, the IMF will now have wired Ksh.109.9 billion ($972.6 million) this year from the loan facility.

Proceeds from the IMF program are channeled towards budget support.

The IMF Executive Board says the government has continued to show commitment to the reform agenda underpinning the 38 months deal including the reduction of debt vulnerabilities and support for economic recovery.

“The FY 21/22 budget delivers on these objectives. A supplementary budget is being prepared, consistent with the flexibility built into the EFF/ECF arrangements, to expand the authorities’ COVID-19 vaccination program, support the SOE reform plan and execute emergency spending related to the drought in the northern regions and security,” the IMF noted in a statement on Saturday.

“Given Kenya’s limited fiscal space, the authorities are proactively managing difficult trade-offs with the view to reduce debt vulnerabilities by rationalising non-priority spending to offset half of the impact of SOE support on the deficit, in line with program commitments.”

The IMF expects Kenya’s economic growth to rebound by 5.9 per cent this year as the local economy bounces back from last year’s COVID-19 pandemic triggered shocks.

The multi-lateral lender however expects pandemic related pressures to persist as the rate of vaccinations in the country remains low.

Despite noting progress on fiscal transparency and governance, the IMF has asked Kenya to begin publishing beneficial ownership information for awarded public tenders early next year and sustain audits of COVID-19 spending.

Further, the IMF expects the Central Bank of Kenya (CBK) to keep low interest rates should inflation expectations remain with the government’s target band.

The IMF projects the Kenyan economy to grow by 5.8 and 5.5 per cent in 2022 and 2023 with average inflation at 5.8 and 4.8 per cent in the respective years.

Meanwhile, the lender sees Kenya’s current account deficit at 5.1 per cent of GDP over three years from 2021.

The fresh disbursement is expected to be timely to not only anchor government spending but also in raising the pool of CBK's usable foreign exchange reserves which currently stand at an estimated 5.28 months of import cover.