Kenya secures new IMF loan worth $447 million to fund its budgetary needs

NAIROBI, Kenya - The International Monetary Fund (IMF) has approved a $447.39 million loan to Kenya to support the country its budgetary needs.

IMF loan approvals follow the fourth review of the $2.34 billion 38-month with Kenya.

This new loan brings Kenya’s cumulative disbursements under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) arrangements to about $1.655 billion.

Under the review, IMF pointed out that Kenya’s economy remains stable and projects it to grow by 5.3 percent this year despite a challenging global environment but warned that climate-related risks are elevated in the medium term.

IMF also noted that the country’s public debt has started to level off due to fiscal consolidation efforts by the government.

However, they warned that obligations carried over from the last financial year and an increase in unbudgeted spending in the early 2022-2023 fiscal year increased pressures on the budget.

The global lender hinted that the new administration of has reasserted Kenya’s commitment to fiscal consolidation, targeting a lower overall fiscal deficit than the original budget.

In his first parliamentary address president announced a cut of $2.4 billion on the budget to ease pressure on the exchequer.

The loan will help buffer Kenya’s foreign exchange reserves which had fallen to just 3.98 months of import cover below the legal threshold of four months.

Antoinette Sayeh, IMF Deputy Managing Director, “Kenya’s commitment to its economic program supported by the Fund’s EFF and the ECF arrangements is anchoring debt sustainability.

The economy has performed well amid slowing global growth, tighter financing conditions, and volatile commodity prices, while the continuing drought has increased food insecurity, and climate-related risks pose ongoing challenges. Mutually reinforcing prudent macroeconomic policies and resolute implementation of structural reforms remain essential to safeguard positive medium-term prospects.”

IMF boss also pointed out a said that the strong performance of tax revenues has supported resilience and cushioned the initial impact of global shocks on households and businesses, and lauded the gradual withdrawal of fuel subsidies by the new administration.

IMF has also welcomed the move by the Central Bank of Kenya (CBK) to raise the base lending rate for the second time in a row to ease inflation arguing that “further tightening would limit second-round effects and keep inflationary expectations well-anchored while supporting external adjustment”.

The IMF further said that addressing vulnerabilities at Kenya Airways and Kenya Power is urgent, along with strengthening the governance framework for state-owned corporations.

GAROWE ONLINE