Kenya seeks review of IMF standby loan facility

Kenya is seeking a review on the use of $688.3 million (Ksh70.22 billion) standby loan from the International Monetary Fund, citing persistent domestic and external shocks in the economy.

The country however, said its performance under the structural economic programme has been in line with targets and all quantitative performance criteria and indicative targets through end-March 2015 had been met.

The letter of intent addressed to the IMF managing director Ms Christine Lagarde and signed by National Treasury Cabinet Secretary Henry Rotich and Central Bank Governor Dr Patrick Njoroge said: “We therefore request modification of the end-September 2015 performance criteria and of end-December 2015 indicative targets for net international reserves, net domestic assets, and the primary budget balance of the Central government.”

Kenya has faced a cash crisis since last month, which the state has blamed on a 60.37 per cent shortfall in targeted revenue collections between July and September, a weak shilling, and high interest rates that have made borrowing expensive.

The IMF approved the $688.3 million loan as Kenya’s quota under the stand-by arrangement and standby credit facility, which would be given in two equal tranches upon completion of semi-annual programme reviews.

The IMF’s stand-by arrangement is an economic programme involving financial aid to a member state in need of financial assistance.

In the letter, the state said it has made significant progress in structural reforms and is planning to address implementation delays in meeting the set indicative targets by streamlining the Debt Management Office, submitting the new CBK Bill to parliament, and by implementing the Treasury Single Account.

“Consistent with our programme commitments, we are bolstering CBK’s ability to conduct stress testing and continue to further strengthen its supervisory framework, with a view to safeguard financial stability,” it said.

It said it would maintain the gross public debt below 45 per cent of the gross domestic product and bring the fiscal deficit over the medium term to three per cent of GDP.

Mr Rotich, while briefing private sector chiefs on the state on the economy on Tuesday last week, said the government has embarked on a comprehensive expenditure review to see what savings can be made from the Sh2.1 trillion budget for the 2015/2016 financial year.

He said there will be wide-ranging cuts through a supplementary budget and only necessary and productive expenditures will survive the chop.

“We are reviewing before we release funds from the exchequer to see whether they are necessary or productive {to the economy},” he said.