Kenya taps Sh28 billion loan facility from IMF

The International Monetary Fund (IMF) will soon disburse another Sh28.2 billion to the National Treasury to help the country recover from the ravages of the Covid-19 pandemic.

This follows an agreement between IMF staff and the Kenyan authorities.

It will be the third disbursement of the Sh256 billion credit facility that Kenya signed with the Washington-based lender on April 2, 2021, said IMF staff in an end-of-mission statement.

The disbursement will push to Sh136.3 billion the money that Kenya has received from the IMF, with the country expected to institute a raft of policy changes to remain in the good books of the Bretton Woods institution. 

Following a staff-level agreement between Kenya and a delegation from the IMF, the release of the funds is now subject to the approval of the IMF management and the Executive Board in the coming weeks.

“Based on the preliminary findings of this mission, staff will prepare a report that subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision,” said the delegation.

Through the two arrangements — Extended Fund Facility (EFF) and Extended Credit Facility (ECF) — Treasury is expected to address its debt vulnerabilities by cutting spending and increasing tax revenues.

Kenya, the IMF said in a statement, is on track to meeting its austerity objectives, a situation that will put debt as a share of the size of the economy, or gross domestic product (GDP), firmly on a downward path.

“Kenya’s fiscal position has been underpinned by strong tax revenue performance this year, buoyed by a robust economic recovery and the important tax policy measures already undertaken as part of Kenya’s multi-year plan to reduce debt-related vulnerabilities,” said IMF.

IMF noted that the increased revenues will help the country deal with the sharp increase in global energy and fertiliser prices on households and businesses while remaining within the authorities’ fiscal targets for the current financial year ending June.

The lender expects Kenya’s economy to grow at 5.7 per cent this year, reflecting an improvement in agriculture and continued recovery in services and other sectors.

IMF also emphasised the restructuring of some select State-owned enterprises including Kenya Airways (KQ) and Kenya Power.

“At KQ, which had already benefitted from a government guarantee on a large portion of its debt liabilities, steady progress on the ongoing restructuring effort will be important to minimise costs to the Exchequer.”