IMF approves Ksh.55 billion loan to Kenya

The International Monetary Fund (IMF) has approved a Ksh.55.1 billion ($447.39 million) loan to Kenya.

The loan represents the fourth tranche of a wider Ksh.288 billion ($2.34 billion) 38-month long loan facility which was first approved in April last year.

The new loan bring total disbursements under the three year program to Ksh.203.8 billion ($1.656 billion) after the fourth review of the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements between the IMF and Kenya.

Nevertheless, cumulative disbursements from the IMF rise to Ksh.297.3 billion ($2.416 billion) following the adjustment/augmentation of the loan facility to factor in additional resources on the request of the Kenyan government.

The IMF says Kenya has made progress on fiscal consolidation as tax performance improves and public debt levels begin to level off.

Nevertheless, the IMF highlights spending pressures under the 2022/23 budget following the carry-over of obligations from the previous financial year after shortfalls in external debt financing in the year to June 2022.

“Kenya’s commitment to its economic program supported by the Fund’s EFF and EDF facilities is anchoring debt sustainability. The economy has performed well amid slowing global growth, tighter financing conditions and volatile commodity prices, while continuing drought has increased food insecurity, and climate-related risks pose ongoing challenges, stated IMF’s Deputy Managing Director and Acting Chair Antoinette Sayeh.

According to the IMF, the lower than expected external financing and planned cuts to foreign-financed projects in the current fiscal year has resulted in lower forex reserves with the Kenya Shilling depreciating significantly against the US dollar across 2022.

The IMF states the structural reform agenda has progressed but addressing financial weakness in State Owned Enterprises (SOEs) and the planned review of the fuel pricing mechanism has been delayed by the recent political transition.

The IMF expects the Kenyan economy to grow by 5.3 per cent this year with inflation averaging at 7.7 per cent in 2022.

Public debt as a percentage of GDP is meanwhile expected to narrow slightly to 66.6 per cent from 67.7 per cent last year as the fiscal deficit contracts to 6.2 per cent of GDP from 8.2 per cent.

The current account deficit (CAD) is meanwhile estimated at 5.7 per cent of GDP with official foreign currency reserves projected at an equivalent 3.7 months of import cover.

$1=Ksh.123.06