Kenya receives second tranche of Sh29.2 billion loan from IMF

Kenya has received $258 million (Sh29.2 billion) from the International Monetary Fund (IMF) that is likely to give critical support to the free-falling shilling.

The IMF’s executive board, the global lender’s highest decision-making body, approved the loan for immediate release, bringing the cumulative disbursements from April 2020 to $972.6 million (Sh109.9 billion).

The disbursement is part of a three-year programme the Kenyan government has with the IMF to address the country’s debt vulnerabilities by cutting wasteful spending and ramping up tax collection.

“The Kenyan authorities remain firmly committed to their economic programme in a challenging environment. The programme performance has been robust," said IMF Deputy Managing Director and Acting Chair Antoinette Sayeh at the end of the board’s discussion.

"All quantitative targets were met – the FY 2020-21 outturn overperformed – and all 2021 structural benchmarks are now completed except one. The authorities should continue executing their multi-year fiscal consolidation plan to reduce debt vulnerabilities.”

The inflow of these dollars into the government’s account at the Central Bank of Kenya (CBK) will go a long way in replenishing the country’s reserve of hard currencies, thus helping the shilling strengthen.

The local currency has been hitting new lows and was trading at 113 against the dollar by end of trading on Friday.

Besides supporting Kenya’s programme to address debt vulnerabilities, the Sh264.4 billion credit facility will also boost the country’s response to the Covid-19 pandemic and enhancing governance.

As part of the agreement, the government is also expected to reform some of its fledgling parastatals, including Kenya Power, major public universities and Kenya Railways so as to reduce their fiscal risks to the government.

IMF noted that Kenya has made notable advances on its structural reform and anti-corruption agenda.

One of the conditions of the programme was for the government to implement the regulations that require any company supplying goods or services to a State corporation to reveal its beneficial owners.

To this end, the IMF had given Kenya until the end of June this year to publish the names of all beneficial owners of the companies - which could, for instance, reveal the owners of companies that benefited from the controversial Sh7.9 billion tenders at the Kenya Medical Supplies Authority.

This is the only condition that the government has not met under the 38-month programme, citing legal difficulties. Recently, the National Treasury said it was on course to complete the requirement.

“Fiscal governance and transparency will be bolstered by the authorities’ action plan to address legal impediments that prevented the publication of beneficial ownership information related to public procurement and by planned audits of Covid-19 vaccine spending, and of FY2020-21 expenditure with a focus on Covid-19-related spending,” Ms Saveh said.