The International Monetary Fund (IMF) is set to consider funding Kenya’s next COVID-19 response, a strong multi-year effort to stabilize and begin reducing debt levels.
The disclosures were revealed by the IMF Staff led by Mary Goodman who conducted a virtual mission to Kenya from October 27 to November 17, 2020.
According to the Mission, Kenya’s development goals have suffered a “significant setback”, and the country faces an arduous task of returning to a path of sustained and inclusive growth.
Kenya has been negotiating with the IMF on a 3½ year Extended Fund Facility (EFF)/Extended Credit Facility (ECF) arrangement.
“Technical work will continue in the period ahead, with a view to reaching agreement on a program that could be presented to the Fund’s Board in early 2021,” said Mary Goodman, IMF team leader-Kenya.
In May, Kenya received Ksh 79.3 billion ($739) under the fund’s Rapid Financing Instrument (RFI) to deal with the adverse economic impact of COVID-19.
“The program would provide resources to protect vulnerable groups and would reduce debt vulnerabilities over time through a multi-year fiscal consolidation centered on raising tax revenues.
It would also advance the structural reform and governance agenda and address weaknesses in some SOEs that have been exacerbated by the COVID-19 shock.
Finally, it would strengthen the monetary policy framework and support financial stability.
The program design would incorporate elements of flexibility to accommodate the high uncertainty about the evolution of COVID-19 and the path of economic recovery,” said Ms. Goodman in a statement.
The mission raised concerns over Kenya’s rising public debt levels and weaknesses noting that, “Key challenges are reduced government tax revenue and rising public debt, which reached 65.9 percent of GDP in FY19/20.”
The team met with Cabinet Secretary for the National Treasury, Mr. Ukur Yatani; Governor of the Central Bank of Kenya (CBK), Dr. Patrick Njoroge; Head of the Public Service, Mr. Joseph Kinyua; the Principal Secretary for the National Treasury, Dr. Julius Muia; Deputy Governor of the CBK, Ms. Sheila M’Mbijjewe; Auditor General, Ms. Nancy Gathungu; and other senior government and CBK officials.