The International Monetary Fund approves Sh28 billion loan to Kenya

The International Monetary Fund (IMF) building. [File, Standard]

The International Monetary Fund (IMF) has approved the disbursement of Sh28 billion as a loan to Kenya.

The latest loan disbursement will be part of the third instalment of a 38-month budget support program.

According to a press release on the IMF website on Wednesday, approval now brings the total funds received by Kenya to Sh143 billion.

The deal, signed in April 2021, aims at addressing Kenya’s debt vulnerabilities.

 “The Executive Board of the International Monetary Fund (IMF) today completed the third review under the 38-month arrangements under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) arrangements,” IMF’s release read in part.

“The Board’s decision allows for an immediate disbursement of SDR 179.13 million (about US$235.6 million), usable for budget support, bringing Kenya’s total disbursements for budget support so far to about US$1,208.2 million,”

The IMF has also lauded Kenya for keeping up with the program’s structural reform requirements despite delays in the implementation.

“Kenya’s economy has rebounded strongly in a challenging environment and is projected to grow 5.7 per cent in 2022. Inflation moved above the Central Bank of Kenya’s (CBK) official target band of 2.5 per cent to 7.5 per cent in June and is expected to peak this year before easing back within the band in early 2023,” IMF added.

“Downside risks predominate in the near term. Uncertainties stemming from the war in Ukraine, continuing drought in the semi-arid regions, unsettled global financial market conditions and the political calendar. But Kenya’s medium-term outlook remains favourable,”

The multi-lateral lender nevertheless says a strong performance in tax collection for the 2021-2022 fiscal year has created fiscal space to temporarily cushion the impact of rising fuel prices through the fuel subsidy while still keeping within the loan-program fiscal targets.

The IMF has retained Kenya’s GDP growth projection at 5.7 per cent for 2022 and 5.3 per cent in 2023.

Inflation is meanwhile expected to average 7.3 per cent this year.

“An ongoing audit of COVID-19 vaccine spending and the recently completed comprehensive audit of the fiscal year 2020-2021 spending with a focus on COVID-19 spending will improve transparency and enable follow-up by enforcement agencies and other stakeholders.”