Kenya expects more IMF funding by year-end

Kenya expects more money from the International Monetary Fund by the end of the year and is in talks with the Fund about combining the seventh and eighth reviews of its support programme, its central bank governor said on Wednesday.

The country and the IMF reached a staff-level agreement on the seventh review of its $3.6 billion (approx. Ksh.446.4 billion) programme in early June.

But the review is yet to be approved by the Fund's executive board after the government was forced to scrap proposed tax hikes and draw up spending cuts in late June in response to mass protests that turned deadly.

"We are in the final stages of an agreement (with the IMF). The fiscal framework has been agreed," Governor Kamau Thugge told a news conference, a day after the Central Bank of Kenya cut its benchmark lending rate by another 75 basis points.

Kenya's government has asked the IMF to conduct an official assessment of corruption and governance issues.

While not directly linked to the next disbursement, the assessment is an attempt to build goodwill with the Fund as it tries to get finances back on track.

Thugge also said on Wednesday that the central bank had been buying dollars on the foreign exchange market to boost Kenya's buffers against potential short-term shocks.

The bank has previously said it has no preferred level for the shilling and only intervenes on the forex market to smooth out volatility.

Thugge said the exchange rate was being supported by dollar inflows from agricultural exports, remittances and foreign investor interest in local securities given high interest rates.

He reiterated the bank's forecast for economic growth of 5.5% next year.

On Tuesday the bank lowered its 2024 growth forecast to 5.1% from 5.4% after slower growth in the second quarter.

Thugge said on Wednesday there could be scope for local interest rates to fall further given that the shilling exchange rate was stable.