IMF completes Article IV consultation and second review of extended agreement under the EFF and ECF agreements for Kenya in 2021

  • The IMF Executive Board today completed the Article IV 2021 consultation and the second review of the EFF / ECF agreements with Kenya, allowing for a total immediate disbursement of approximately $ 258.1 million in budget support.
  • The Kenyan authorities have continued to show strong commitment to their reform agenda in a difficult environment and are acting to reduce debt vulnerability while supporting economic recovery.
  • They have carefully controlled government spending to contain the deficit and are taking steps to reform state-owned enterprises (SOEs) to limit budgetary pressures while protecting social programs.
  • Washington, DC: The Executive Board of the International Monetary Fund (IMF) today completed the Article IV 2021 consultation[1]and the second review of the 38-month Extended Fund Facility (EFF) and 38-month Extended Credit Facility (ECF) arrangement for Kenya. The board’s decision calls for a total immediate disbursement of SDR 185 million (approximately $ 258.1 million), bringing Kenya’s total budget support disbursements under the agreements to approximately $ 972.6 million.

    Kenya’s EFF / ECF agreements totaling SDR 1,655 billion (305 percent of quota), or approximately $ 2.34 billion at the time of program approval on 2nd, address debt vulnerability and its response to the COVID-19 pandemic and improve governance.

    Kenya showed remarkable resilience to the COVID shock in 2020 and is experiencing an economic recovery. It is now estimated that growth will accelerate to 5.9 percent in 2021. Kenya’s COVID-19 vaccination program picked up speed in the second half of 2021, although uncertainty and pandemic pressure will continue until vaccinations are widely available. The political calendar is also causing uncertainty.

    Kenya’s economic program aims to reduce debt vulnerability through multi-year fiscal consolidation efforts focused on increasing tax revenues and tight spending control while protecting resources to protect vulnerable groups. The budget for fiscal year 21/22 meets these goals. In line with the flexibility of the EFF / ECF agreements, a supplementary budget is currently being prepared to expand the authorities’ COVID-19 vaccination program, support the state-owned enterprise reform plan and implement emergency spending related to the drought in the northern regions and security. Given Kenya’s limited fiscal space, the authorities are proactively making difficult compromises to reduce debt vulnerability by streamlining non-priority spending in order to offset half the impact of government support on the deficit in line with program commitments.

    Kenya has also made remarkable progress on its structural reform and anti-corruption agendas. Financial governance and transparency are enhanced by the authorities’ action plan to remove legal barriers that have prevented the disclosure of beneficial ownership information related to public procurement, as well as planned reviews of COVID-19 vaccine spending and FY20 / 21 with a focus on COVID. strengthened -19-related expenses. As part of their strategy of addressing the challenges in the SOE sector and putting companies on a financially viable footing, the authorities are formulating robust restructuring strategies with safeguards to protect the Treasury’s financial interests. The authorities also plan to further improve their monetary policy framework and continue to support financial stability.

    At the end of the board discussion, Ms. Antoinette Sayeh, deputy managing director and deputy chairwoman, said the following:

    “The Kenyan authorities remain committed to their economic program in a challenging environment. Program performance was robust. All quantitative targets were achieved – the result for FY 2020/21 exceeded – and all structural benchmarks for 2021 have been completed except for one.

    “The authorities should pursue their multiannual fiscal consolidation plan to reduce debt vulnerability. In FY21 / 22, some additional fiscal space for emergency spending is needed to meet the drought in the north and the emerging security needs; The planned supplementary budget should also provide funds for the expansion of COVID-19 vaccinations and the support of state-owned companies, in line with the program design. Strengthening domestic revenue mobilization, maintaining control of expenditure while protecting priority social spending, and improving spending efficiency will continue to be essential. It takes courageous political engagement at all levels of government to ensure that the budget for fiscal 22/23 is in line with the authorities’ program.

    “Proactive efforts to address the tax risks of State Enterprises (SOEs) should continue. Financial assistance to state-owned enterprises requires difficult compromises and adequate safeguards, given Kenya’s limited fiscal space and the need to maintain debt sustainability.

    “Further strengthening fiscal transparency and governance requires more proactive efforts. Authorities should remove legal barriers to start publishing beneficial ownership information for public tenders in early 2022, conduct planned audits of COVID-19 spending, and immediately track previous audits.

    “Well-coordinated policies from the Central Bank of Kenya have supported economic resilience and the banking sector. Monetary policy stance should remain accommodative as long as inflation expectations are well anchored.

    “The program is subject to increasing global and national risks, including the pandemic, tightening global funding conditions, and potential pressures from the upcoming political calendar. The medium term prospects of Kenya remain positive and the authorities’ continued commitment to their economic program is essential to maintain macroeconomic balance while ensuring more sustainable, green and inclusive growth. “

    Table 1. Kenya: Selected Economic Indicators, 2020-23


    European summer time.








    Real GDP growth (%)






    Inflation Average (%)





    Federal finances (financial year)1

    Income (% GDP)





    Expenditures (% GDP)





    Primary balance (% GDP)





    Budget balance (% GDP)





    Public debt (% GDP)





    Money and credit

    Big Money (% Change)





    Loans to the private sector (% change)





    Base rate, end of period (%)


    Balance of payments

    Current account (% GDP)





    Reserves (in months of imports)





    Foreign debt (% GDP)





    Exchange rate

    REER (% change)


    [1]In accordance with Article IV of the IMF’s Statutes, the IMF normally holds bilateral discussions with its members every year. A team of employees visits the country, collects economic and financial information and discusses the country’s economic development and policy with officials. After returning to headquarters, the staff prepares a report that forms the basis for discussion in the board.
    / Public release. This material from the original organization (s) may be of a point nature and may be edited for clarity, style and length. The views and opinions expressed are those of the author (s). Full view here.

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