IMF readies Kenya’s KES44bn loan tranche, cuts growth forecast to 6.3 per cent

May 18, 2021 Newsroom

Kenya is inching closer to getting KES44 billion credit representing the second tranche of the 38-month IMF KES251 billion ($2.34 billion) loan.

The second tranche of financing is, however, premised on the conclusion of policy reforms, including an audit of all COVID-19 related expenditures covering the 2019/20 financial year.

“In addition, the authorities’ plan to adopt a common payroll system at the national and county level should help contain spending growth and limit the scope for corruption,” the International Monetary Fund (IMF) said in a statement on May 17.

Further, the release of the funds, which now awaits IMF board’s approval in the coming weeks, is anchored on the publication of information on companies that win procurement contracts, including the names of their beneficial owners.

IMF staff commend the authorities’ decisive policy actions to contain the COVID-19 outbreak, the Washington-based institution said adding: “their actions helped to cushion the blow to the economy and maintained the momentum necessary to advance their economic reform agenda.”

The global lender, which conducted a virtual tour into the country between April 29 and May 14, noted that with the easing of the third wave of COVID-19 infections compared to high levels seen in April, a range of containment curbs have been lifted.

The institutions, which faced a barrage of attacks recently from Kenyans online for approving the KES251 billion loan, lauded the government the ongoing COVID-19 vaccination program, which the IMF credit line is designed to support to accelerate and expand vaccinations.

“They (Kenya government) met the fiscal balance target at end-March by a wide margin and had fully implemented their planned tax policy measures, although with continuing pressures from the pandemic, tax revenue yields were slightly below expectations,” said IMF.

The IMF noted that Kenya’s next financial year budget is being aligned with the authorities’ ambitious multi-year plan to mitigate debt vulnerabilities and it secures resources to support social spending.

Kenya is also developing a strategy to assess and manage risks to the budget from state-owned enterprises by leveraging on the results of ongoing financial evaluations of those firms facing the greatest pressures, added IMF.

At the same time, the IMF has cut Kenya’s growth outlook for 2021 to 6.3 per cent from a higher 7.6 per cent to reflect realism on the impact of the pandemic on the economy.