The International Monetary Fund (IMF) has reached a staff level agreement to provide US$ 976 million for Kenya, subject to approval by the IMF Executive Board.
- Notably, this has been downsized from the initial US$ 1.27 billion, following the partial refinancing of the US$ 2 billion eurobond in February 2024.
- This brings the total IMF financial commitment to Kenya, under the Extended Credit Facility (ECF), to US$ 3.60 billion.
- The Resilience and Sustainability Facility (RSF), approved on 17th July 2023, stands at US$ 120 million.
During meetings held in Nairobi from April 2 to 12, May 9 to 15, 2024 and virtually, the IMF team also discussed key technical aspects of the agreement, including recalibrating access to IMF resources to align more closely with Kenya’s current needs following its access to the international bond markets earlier this year.
The policy package seeks to preserve debt sustainability and price stability, manage fiscal risks, address financial sector vulnerabilities, and AML/CFT deficiencies while continuing to advance structural reforms to support inclusive and resilient growth.
According to the Fund, Kenya’s economy grew 5.6 percent in 2023 driven by a strong recovery in Agriculture and Services sector resilience on the back of favorable weather conditions. However, destruction from recent floods poses risks and therefore subject to support from both national and international stakeholders.
Nevertheless, inflation has decelerated to within the 5% midpoint with core inflation remaining stubborn. Following the June 2024 Eurobond buyback, refinancing risks have since watered down with sovereign spreads returning to mid 2022 levels.
According to the IMF, improved market sentiment has fostered a recovery in net capital inflows and contributed to the appreciation of the shilling.
“Despite these positive developments, a significant shortfall in tax revenue collection and deterioration in the primary fiscal balance in FY 2023/24 relative to program targets is expected to keep domestic borrowing needs elevated. As a result, interest payments have increased, putting pressure on public debt even after the latter benefited from a strengthened shilling.”
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