IMF okays Sh78 billion lending for Kenya
Kenya is set to receive a total of KES78 billion from the International Monetary Fund (IMF), coming on the back of revenue reforms that have left the public ruffled, often resorting to mass protests.
The fresh financing comes as the East African country grapples with a debt pile averaging $80 billion with servicing obligations eating up every six out of KES10 collected by the taxman.
The IMF said the funding will go towards supporting Kenyan “authorities’ efforts to rebuild fiscal and external buffers, including to enhance resilience to climate shocks.”
“However, large revenue shortfalls in FY2023/24 and pushback against revenue measures owing to governance concerns pose a challenge to the ongoing fiscal consolidation efforts,” the Bretton Woods institution added.
The latest disbursement has been delayed following civil unrest in June and July that was triggered following a fallout over the Finance Bill 2024 that aimed at raising about $2 billion through punitive taxes.
Inflation decelerating
“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,” said Gita Gopinath, IMF’s first deputy managing director in a statement.
She added, “the EFF/ECF and the RSF arrangements continue to support the authorities’ efforts to anchor macroeconomic stability, reduce debt vulnerabilities, promote reforms, and mitigate climate-related risks.
This was the seventh and the eighth review under the IMF’s extended arrangement under the Extended Fund Facility (EFF) and the arrangement under the Extended Credit Facility (ECF), approved in April 2021, and a review under the Resilience and Sustainability Facility (RSF) arrangement, approved in July 2023, with Kenya.
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Forex reserves
“Performance since the last reviews of these arrangements has weakened. While the accumulation of foreign exchange reserves and inflation were 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,” noted Gita.
Further, the multilateral lender tasked authorities in Nairobi to tackle several challenges including addressing deficiencies in governance and fighting corruption. It also called for measures to firm up checks on anti-money laundering, policy reforms to attract investments, and initiatives to build climate resilience.
