NAIROBI, Kenya, Nov. 9 (Reuters) – Kenya is expected to receive US$433 million (Shh52.7 billion) from the International Monetary Fund (IMF) as part of the US$2.34 billion (Shh284.8 billion) facility approved last April.
The agreement is subject to approval by IMF management and the Executive Board in the coming weeks.
“Upon completion of the Executive Board review, Kenya will have access to US$433 million, bringing the IMF’s total financial assistance under these arrangements to US$1,548 million,” the IMF said in a statement.
The funds will help Kenya meet external financing needs stemming from the drought and difficult global financing conditions.
“The Kenyan economy has shown resilience in the face of a challenging environment. Food insecurity has increased due to severe drought in parts of the country. Higher food and energy prices have pushed up inflation and put pressure on the external position,” the IMF said.
The multilateral lender noted that the peaceful conclusion of the country’s elections has removed uncertainty and lending to the private sector is increasing.
The IMF forecasts growth of 5.3 percent in 2022 amid domestic policy tightening and a global slowdown, both of which are expected to weigh on growth in 2023 as well.
The medium-term outlook remains favourable, supported by proactive reform efforts by the new government.
“There has been good progress on the fiscal adjustment needed to address debt vulnerabilities, although pressures remain elevated. The headline deficit on a cash basis declined from 8.2 percent of GDP in FY2020-21 to 6.2 percent of GDP in FY2021-22,” the IMF said.
Despite the improved fiscal adjustment, the IMF noted that a constrained borrowing environment for the country meant planned external commercial financing failed to materialize.
“The lack of funds contributed to 0.7 percent of GDP in unpaid commitments carried over to FY2022/23. Significant unscheduled spending in the first few months of this fiscal year, much of it for fuel subsidies, poses an additional challenge,” it said.
Looking ahead, the IMF expects Kenya to continue with its structural and governance reforms.
This includes the completion of ongoing efforts to release beneficial ownership information for government contracts awarded, which will be an important step towards greater transparency and accountability.
The key is reforming financially troubled state-owned companies – including Kenya Airways and Kenya Power and Lighting Company.