IMF approves Kenya’s economic reforms plan for Sh44 billion loan tranche

The International Monetary Fund (IMF) plans to immediately wire about Kes 44 billion (US$ 407 million) for Kenya’s budget support noting that the country has shown strong commitment to reforms amid the pandemic.

The move comes after the lender’s Executive Board completed their first review of the 38-month Extended Arrangement under the Extended Fund Facility (EFF) and 38-month arrangement under Extended Credit Facility (ECF) for Kenya on Wednesday, June 23.

In April, the IMF approved a total of Kes 255 billion (US$ 2.34 billion) loan aimed at supporting Kenya address debt vulnerabilities, support the response to the COVID-19 crisis and enhance governance.

The Bretton Woods institution observed that Kenya is staging an economic recovery despite a recent third wave of COVID-19 infections that is wracking the county and the economic growth is projected to pick up to 6.3 per cent this year.

However, uncertainty and pandemic-related pressures will persist until vaccinations become widely available, it added.

Read also: Pandemic sets stage for IMF-led reforms in Kenya’s state owned enterprises

Data from the Ministry of Health shows that a total of 1.2 million people have been vaccinated out of which 997,420 have received their first dose while just over 200,000 have gotten their second AstraZeneca vaccine jab.

Kenya’s economic program seeks to reduce debt vulnerabilities through a multi-year fiscal consolidation effort centered on raising tax revenues and tightly controlling spending while safeguarding resources to protect vulnerable groups.

“The recent publication of comprehensive audits of COVID-19 spending, along with the forthcoming disclosure of beneficial ownership information of companies that are awarded procurement contracts, are important steps to strengthen fiscal transparency and accountability in the use of public resources,” said Ms Antoinette Sayeh, Deputy Managing Director and Acting Chair, IMF Executive Board.

While calling for fiscal reforms in state owned enterprises in April, the IMF singled out Kenya Power, Kenya Airways and three biggest public universities in Kenya as candidates for shake up.

While endorsing the latest disbursement, the IMF noted that Kenyan “authorities have conducted an in-depth evaluation of the financial health of major state-owned enterprises (SOEs) facing the largest risks.”

“The Central Bank of Kenya (CBK) has provided critical support during a very uncertain period. The stance of monetary policy should remain accommodative as long as inflation and inflation expectations remain well-anchored within the target band. Maintaining close supervision of credit risks and provisioning should continue to be a priority,” said Ms Sayeh.

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