The International Monetary Fund (IMF) and Kenya have agreed on a three-year, KSh262.5 billion ($2.4 billion) loan to assist Kenya in its response to the covid19 pandemic and to put strong effort to reduce the country’s debt levels relative to GDP.
Kenya’s economy is slowly recovering from the adverse effects of the covid19 pandemic on businesses and households. The IMF program will provide support to the vulnerable Kenyans and boost government’s efforts to revive the economy.
IMF staff conducted virtual missions to Kenya from 9th to 17th December 2020 and from 4th to 15th February 2021 to negotiate the three-year IMF program. The IMF program falls under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements and is “subject to IMF management approval and Executive Board consideration”.
Kenya was severely affected by the pandemic, but the measures introduced by the government in early March to minimize the effects of covid19 helped some businesses to sail through the storm. At the start of 2021, the government began to reverse some of the covid19 support measures such as the temporary corporate and personal income tax cut. The move led to increased tax revenue collection.
The IMF program aims to reduce debt vulnerabilities by raising tax revenue and reducing government spending and thereby safeguard resources to protect the vulnerable groups in Kenya. In addition, the program aims to address weaknesses in some state-owned enterprises and strengthen transparency and accountability in government agencies through an anti-corruption framework. Lastly, the program ‘would strengthen the monetary policy framework and support financial stability.’
IMF mission team, in a statement on the IMF website, thanked Kenyan authorities for the candid and constructive discussions and their commitment to the success of the program.