The Board of the International Monetary Fund (IMF) has concluded its seventh and eighth reviews of Kenya’s economic situation, following its mission to evaluate the country’s ability to service its debt.
As a result, the IMF has approved the release of $606 million (Ksh 78 billion), which will be distributed in two separate tranches.
In a report published on October 30, the IMF confirmed the completion of these reviews, which pertain to the extended arrangement under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) established in April 2021, as well as a review under the Resilience and Sustainability Facility (RSF) arrangement approved in July 2023.
This significant decision facilitates the immediate release of approximately $485.8 million (Ksh 62.5 billion) under the EFF/ECF arrangements and around $120.3 million (Ksh 15.4 billion) under the RSF arrangement, culminating in a total of $606 million (Ksh 78 billion).
Gita Gopinath, the First Deputy Managing Director of the IMF and Acting Chair, remarked on the resilience of the Kenyan economy, which has demonstrated growth exceeding 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 stated that the EFF/ECF and the RSF would persist in their support for the authority’s initiatives aimed at establishing macroeconomic stability, alleviating debt vulnerabilities, advancing reforms, and addressing climate-related risks.
Nevertheless, she noted that, in comparison to previous assessments, the arrangements had deteriorated.
“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 stated.
She further stressed the importance of policymaking remaining agile in order to avoid the elevated risks around the fiscal strategy.
“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 market.
“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 said.
