IMF grants 6-month extension on Sh150bn credit line

The International Monetary Fund (IMF) has approved a request by the government to extend an emergency loan facility for a period of six months.

The $1.5 billion (Sh150 billion) facility gives the government a cushion to withstand external shocks like rising fuel prices and a strengthening dollar.

The approval follows the government’s commitment to finish mandatory reviews on economic policies such as scrapping of the interest rate cap and cutting back on debt uptake.

“On March 12, 2018, the Executive Board of the International Monetary Fund approved Kenyan authorities’ request for a six-month extension of the country’s Stand-By Arrangement to allow additional time to complete the outstanding reviews,” the IMF said in a statement.

The facility was set to expire at the end of the month.

The extension now buys the National Treasury time to implement the recommendations of the IMF even as it seeks a further two year extension of the standby loan facility.

“In support of this request, the authorities have committed to policies that will enable them to achieve the program objectives, including reducing the fiscal deficit and substantially modifying interest controls,” the IMF said.

An IMF team had been in the country earlier in the month meeting with government officials over economic and fiscal policies.

The government introduced a cap on interest rates in September 2016 in a bid to cushion borrowers from exorbitant interest rates.

However with credit remaining in limited supply to the private sector, the IMF had recommended its removal to stimulate growth.

Earlier this month, the Treasury secretary Henry Rotich said it was a good time to revisit the cap, while the chair of the parliament’s influential budget committee has also said there was a case for altering it.

The Treasury, Central Bank of Kenya and banks have been stirring debate on the need to amend the interest cap law.

The government has until September to implement the recommendations.