The International Monetary Fund (IMF) Board sent to Kenya to conduct an economic review and assess its capability to repay its debt has completed its seventh and eighth reviews and approved the disbursement of $606 million (Ksh78 billion) to be disbursed in two consignments.
In a report released on October 30, the global financier announced that the two reviews; the extended arrangement under the Extended Fund Facility (EFF) and the arrangement under the Extended Credit Facility (ECF), approved in April 2021, and a review under the Resilience and Sustainability Facility (RSF) arrangement, approved in July 2023 with Kenya, had been completed.
This major decision allows for the immediate disbursement of about US$485.8 million (Ksh62.5 billion) under EFF/ECF arrangements and about US$120.3 million (Ksh15.4 billion) under the RSF arrangement totaling $606 million (Ksh78 billion)
Gita Gopinath, First Deputy Managing Director of the IMF and Acting Chair, noted that the Kenyan economy had remained resilient, recording a growth above the regional average.
“Kenya’s economy remains resilient with growth above the regional average, inflation decelerating, and external inflows supporting the Shilling and a buildup of external buffers, despite a difficult socio-economic environment,” she stated.
She added that the EFF/ECF and the RSF would continue to support the authority's efforts to anchor macroeconomic stability, reduce debt vulnerabilities, promote reforms, and mitigate climate-related risks.
However, as compared to the last reviews, she stated that the arrangements had weakened, “While the accumulation of foreign exchange reserves and inflation was better than expected, the fiscal performance fell significantly short of the targets. The revenue and export underperformances increased debt vulnerabilities. Implementation of several reforms was also delayed.”
She further stressed the importance of policymaking remaining agile in order to avoid the elevated risks around the fiscal strategy noting, “Contingency planning remains critical with policies adapting to evolving outcomes to safeguard stability and ensure that program objectives continue to be met.”
“The Central Bank of Kenya’s decisive actions have supported price stability and external sustainability, including through institutional changes to improve the functioning of the monetary policy operational framework and the money and foreign exchange markets.”
"Exchange rate flexibility is vital to improve resilience to external shocks and competitiveness. Addressing banks’ deteriorating asset quality and emerging risks requires close monitoring and strengthened oversight," she added.
On October 25, a high-level delegation from the National Treasury and the Central Bank of Kenya (CBK) traveled to Washington D.C. to attend the 2024 International Monetary Fund (IMF)/World Bank Annual Meetings ahead of the decision by IMF to release the funds.
“These meetings present an opportunity to forge strategic partnerships and access financial resources that are critical for continuing Kenya’s economic recovery and sustained growth. We expect to share with our development partners Kenya’s recent successes in maintaining low inflation and supporting growth,” stated CS Mbadi.