The International Monetary Fund (IMF) Executive Board has approved the seventh and eighth reviews of Kenya’s economic program, unlocking a $606 million loan disbursement.
Kenya and IMF staff reached an agreement on the seventh review of the $3.6 billion program in June.
However, the final board approval and subsequent disbursement were delayed due to widespread protests that resulted in significant loss of life.
Despite a challenging socio-economic climate, “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,” IMF First Deputy Managing Director Gita Gopinath said in a statement on Wednesday.
The IMF emphasized the need for enhanced governance and transparency in Kenya. The government faces the complex task of increasing domestic revenue to fund essential public services while managing substantial debt service obligations.
The IMF’s approval also includes a component of lending under its Resilience and Sustainability Facility (RSF).
This support is crucial for Kenya to address its current liquidity constraints, primarily driven by high debt interest payments.
IMF Backs East African Economies
Rwanda
Rwanda is on the brink of securing significant IMF financing.
The IMF has concluded staff-level agreements under the Policy Coordination Instrument (PCI), Resilience and Sustainability Facility (RSF), and Stand-by Credit Facility (SCF).
A board decision is expected in December 2024, which, if approved, would release approximately US$185 million to Rwanda.
Tanzania
The IMF and Tanzanian authorities reached a staff-level agreement on the fourth review under the Extended Credit Facility (ECF) and the first review under the Resilience and Sustainability Facility (RSF).
This agreement will release approximately US$265.78 million, bringing total IMF financial support to Tanzania to about US$758.11 million under the ECF and US$114.07 million under the RSF.
A Challenging Fiscal Landscape
These IMF interventions come at a time when East African economies face significant fiscal challenges.
Kenya and Rwanda have projected fiscal deficits of 5.0% and 7.3%, respectively.
While Tanzania’s fiscal outlook is more optimistic, the region as a whole requires prudent fiscal management and increased revenue mobilization to ensure sustainable growth.
