The International Monetary Fund ( IMF) has reached a staff agreement to advance KSh 28 billion loan to Kenya as part of the $2.3 billion Special Drawing Right (SDR) approved in April 2021.
However, the agreement is subject to the approval of IMF management and the Executive Board.
The agreement is the third review of the economic policies program which took place between March 31 and April 22.
International Monetary Fund (IMF) EFF and ECF Financing Programme
|Date||Amount Received (USD mn)||Amount Received (Kshs bn)|
|Total Amount Received||1,216.6||140.8|
|*Expected Funds upon IMF management and executive board approval|
IMF says Kenya is on track to meet its fiscal objectives, made progress, and is moving forward on its governance and anti-corruption agenda
“Kenya’s fiscal position has been underpinned by strong tax revenue performance this year, buoyed by a robust economic recovery and the important tax policy measures already undertaken as part of Kenya’s multi-year plan to reduce debt-related vulnerabilities,” IMF said in the report.
IMF projects Kenya’s Growth at 5.7 percent in 2022
Kenya’s economic growth is projected at 5.7 percent of GDP for FY22-23 as the effects of the pandemic wane, and the authorities remain vigilant.
“Staff projects growth at 5.7 percent in 2022, reflecting a pickup in agriculture and continued recovery in services and other sectors. By mid-April 2022, 30 percent of adults had been fully vaccinated against COVID-19, up from 5 percent at the end-2021.”
“The medium-term outlook remains favorable, supported by Kenya’s proactive reform efforts, although the outlook is subject to uncertainty.”
In addition, IMF lauded Kenya for making progress on restructuring state-owned enterprises including Kenya Airways and Kenya Power whose ongoing restructuring effort was deemed important to minimize costs to the Exchequer.
KQ will receive KSh 36.6 billion bailout in the year starting July as part of efforts to minimize cash-flow constraints following global lockdowns triggered by the Covid-19 pandemic
The government has directed the airline to trim its network and rationalize its flight frequencies.
“At KPLC, crystallizing an action plan to restore KPLC’s medium-term profitability and fully cover any financing gaps through end-2023 will likewise be critical to minimize calls on the budget,” IMF pointed out
The CBK was lauded for making progress in strengthening its monetary policy framework.
“The banking sector has remained resilient, supported by steps taken by the CBK to sustain the economy and help households and businesses navigate the challenging environment,” the lender indicated.
“The expected receipt of the Kshs 28.4 bn loan funds will increase the country’s dollar inflows and help protect the Kenyan shilling against significant depreciation. Additionally, the funds will help improve investor sentiments towards the country given the heightened perceived risk which has seen the yields on Eurobonds increase significantly since the year begun,” according to Cytonn Investments Analysts.