The International Monetary Fund (IMF) and Kenya have reached a staff-level agreement worth KSh 56.58 billion ($410 million).
If approved, the arrangements provide access to a total amount of SDR1.818 billion (about US$2.43 billion at the current exchange rate).
The mission led by Haimanot Teferra also considered Kenya’s request for access under the IMF’s Resilience and Sustainability Facility (RSF) and further augmentation under the EFF/ECF.
“The agreement is subject to IMF management approval and consideration by the Executive Board, which are expected in July. Upon completion of the fifth review by the IMF Executive Board, Kenya would have immediate access to SDR306.7 million (about US$410 million), including from the augmentation of access under the ECF/EFF,” she said.
This would bring total IMF financial support disbursed under the EFF and ECF arrangements to SDR 1,509 million (about US$ 2,017 million).
With the EFF/ECF augmentations and the RSF support, the total IMF commitment under these arrangements would be SDR2.633 billion (about US$3.52 billion).
| International Monetary Fund (IMF) EFF and ECF Financing Programme | ||
| Date | Amount Received (USD mn) | Amount Received (Kshs bn, 1 USD = Kshs 138.3) |
| Apr-21 | 307.5 | 42.5 |
| Jun-21 | 407.0 | 56.3 |
| Dec-21 | 258.1 | 35.7 |
| Jul-22 | 235.6 | 32.6 |
| Nov-22 | 433.0 | 59.9 |
| Jul-23 | *410.0 | 56.7 |
| Total Amount Received | 2,051.2 | 283.7 |
| Amount Pending | 1,470.0 | 204.2 |
| *Expected funds upon IMF management and executive board approval | ||
The government budget has been under pressure on the back of low revenue collection as well as tight financing conditions, evidence
Analysts View
“The government budget has been under pressure on the back of low revenue collection as well as tight financing conditions, evidenced by the total revenue collected as of the end of April 2023 amounting to Kshs 1,639.8 billion, equivalent to 78.4% of the revised estimates of Kshs 2,192.0 billion for FY’2022/2023 and was 89.8% of the prorated estimates of Kshs 1,826.7 billion,” Cytonn Investments.
“As such, the funding is expected to support the economy amid a backdrop of the country’s economic growth as evidenced by the GDP of 4.8% in 2022, which was lower than the 7.6% growth recorded in 2021.
Additionally, upon disbursement, the financing is expected to boost the country’s dwindling foreign exchange reserves which currently stand at USD 6.5 million representing 3.6 months of import cover, below the minimum statutory requirement of 4.0 months of import cover.
The Resilience and Sustainability Facility (RSF) is also expected to aid in addressing challenges posed by climate change, while also strengthening macroeconomic stability.”
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“With the fiscal year set to close on June 2023 – and the fiscal metrics having fallen significantly behind, the facility will be key to alleviating the government’s current liquidity constraints,” note analysts from NCBA Bank Research.
“Moreover the sovereign’s constrained fiscal position has warranted several debt ratings downgrades since December 2022 with the latest being the downgrade by global rating agency Moody’s.
Despite this highlighting the debt sustainability concerns—the yields on Kenya’s Eurobonds did not indicate any significant volatility. Yields have been moderating since the 3rd week of April. Investors had already priced in a downgrade by Moody’s.”
