Kenya starts talks on additional financing as IMF officials arrive in Nairobi

Kenya has begun pushing for additional resources from the International Monetary Fund (IMF) as a delegation from the Washington DC-based multilateral lender lands in Nairobi.

An IMF staff team led by Mary Goodman is currently in Nairobi for its fourth review of Kenya’s 38-month program with the lender under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF).

The visiting team is expected to reach a staff-level agreement on the multi-year budget support program before the approval of the agreement at board level later this year and a fourth tranche disbursement from the Ksh.283.7 billion ($2.34 billion) program.

The Goodman-led team is expected to meet with key Kenyan authorities including officials at the National Treasury, the Central Bank of Kenya (CBK) Governor, and the Head of Public Service.

Despite the existence of the EFF/ECF frameworks, CBK Governor Patrick Njoroge has pushed for additional resources from the IMF to offset a financing gap occasioned by Kenya’s lack of access to international capital markets from untenable interest rates on sovereign debt instruments.

“We do have a program with the IMF and there was a certain financing need programmed in. What has happened is that the financing need has increased. We need to see how that gap can be filled within the program and those are options we are discussing with the IMF teams,” he said on Tuesday.

The IMF did not however immediately respond to queries sent by Citizen Digital on Kenya’s additional options for financing given the current arrangement which runs to June 1, 2024.

IMF offers financial support to countries through a variety of tools which include current lending and stand-by arrangements.

“IMF lending aims to give countries breathing room to implement adjustment policies in an orderly manner, which will restore conditions for a stable economy and sustainable growth,” IMF states on its lending factsheet.

Kenya has in recent years been a beneficiary of IMF financial support which was prompted mainly by the impact of the COVID-19 pandemic.

In May 2020 for instance, Kenya received a Ksh.89.6 billion ($739 million) emergency loan through the institution’s Rapid Credit Facility (RCF) which was centered on addressing Kenya’s balance of payment needs.

In April last year, the IMF board approved the 38-month program which will see the disbursement of Ksh.283.7 billion ($2.34 billion) over the term of the program.

So far the program has facilitated the disbursement of Ksh.146.4 billion ($1.208 billion) as of July this year with the next disbursement set for December this year.

Additionally, Kenya earned Ksh.89.4 billion ($737.6) million worth of new special drawing rights (SDRs) from the IMF in August 2021.

Previously, Kenya has benefitted from a variety of IMF support programs including the Standby Arrangement, Standby Credit Facility and the Structural Adjustment Facility Commitment.

In April this year, the IMF credited a new lending facility known as the Resilience and Sustainability Trust (RST) under which Kenya may derive additional resources from.

Earlier this month, Rwanda tapped the new facility to shore up government financing.

The RST offers low-cost loans to developing countries with emergency currency or SDRs that wealthy countries will contribute.

CBK Governor Patrick Njoroge had led the calls to advanced economies to donate their surplus SDRs to developing countries.

While not a loan or currency, SDRs are usually a claim on free usable currencies allowing holders to sell the special drawing rights for actual currency.

$1=Ksh.121.23