Kenya to Receive 52 Billion Shillings Loan From IMF

Kenya is set to receive 52 billion shillings from the International Monetary Fund’s (IMF) Extended Fund and Extended Credit Facilities (EFF & ECF).

The disbursement which is yet to be approved by the lender’s management and executive board follows the conclusion of an IMF staff mission to Kenya which represented the fourth review of the country’s 38-month program with the multilateral lender and will bring the total IMF financial support under the EFF & ECF to $1,548 million (188.3 billion shillings).

According to IMF, the fund will help to cover external financing needs resulting from drought and challenging global financing conditions.

Higher food and energy prices have pushed up inflation and pressured external positions, with the peaceful completion of elections lifting uncertainty thereby triggering credit expansion to the private sector. IMF staff who visited Kenya from October 25 – November 8 said the country is making good progress in addressing debt vulnerability despite a challenging environment.

GDP grew by 6 percent year-on-year in the first half of 2022, supported by robust services sector activity notwithstanding a decline in agricultural output. Food insecurity also increased despite a severe drought in parts of the country. Higher food and energy prices pushed up inflation and pressured the external position. IMF projects growth at 5.3 percent in 2022 amid domestic policy tightening and a global slowdown that are likely to also weigh on growth in 2023.

“There has been good progress on fiscal adjustment needed to address debt vulnerabilities through pressures remain elevated. The overall deficit on a cash basis declined from 8.2 percent of GDP in FY2020/21 to 6.2 percent of GDP in FY2021/22. This was supported by strong tax revenue, which increased from 12.6 to 13.7 percent of GDP. However, a constrained borrowing environment meant that planned external commercial financing did not materialize,” said IMF.

The IMF has however called for rapid structural and governance including reforms at the financially-troubled state-owned enterprises including Kenya Airways and Kenya Power.

‘’This includes completing efforts underway to publish beneficial ownership information for awarded government contracts, which will be a major step towards greater transparency and accountability. Reform of financially-troubled state-owned enterprises—including Kenya Airways and Kenya Power and Lighting Company will also be key,’’ it added.

At the end of the 38-month program which expires on June 30, 2024, Kenya is expected to have received 284.6 billion shillings ($2.34 billion) from the IMF program which was reached in February last year.