IMF & Kenya Reach Staff Level Agreement on Kes 262.7 billion Loan
The International Monetary Fund (IMF) on Monday said it will soon disburse Kes 262.69 billion (USD 2.4 billion) to the Government of Kenya after it’s staff virtual visit and the Kenya treasury reached an agreement on a 38-month financial package.
The IMF said that its team and the Kenyan officials reached an agreement on a 38-month program to help the next phase of the country’s COVID-19 response and a strong multi-year effort to stabilize and begin reducing debt levels relative to GDP through the IMF’s rapid response facility.
The IMF staff team had earlier on conducted a virtual mission to Kenya from 9 to 17 December, 2020 and concluded their assessments between 4th and 15th February, 2021, paving way for the government to access the standby facility with the deal now awaiting the international lender’s board approval that will see the country receive the first tranche of close to Kes 75 billion within the current financial year.
IMF Study on Government of Kenya
The team held various consultative meetings with Treasury Cabinet Secretary Ukur Yatani, Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge, Head of Public Service Joseph Kinyua, the Principal Secretary for the National Treasury, Dr. Julius Muia; Deputy Governor of the CBK, Ms. Sheila M’Mbijjewe and many other other government officials in the fiscal planning and budgeting sectors.
The new facility has been anchored on expected fiscal tightening measures including the recent reversal on tax relief measures and expected reforms on State owned enterprises (SOEs).
“The staff-level agreement is subject to IMF management approval and Executive Board consideration, which is expected in the coming weeks. The program will support the next phase of the country’s COVID-19 response and the authorities’ plans for a strong multi-year effort to stabilize and begin reducing debt levels relative to GDP, laying the ground for durable and inclusive growth over the years to come,” said Mary Goodman, an IMF staffer leading the mission to Kenya.
“Overall, the Kenyan Authorities’ decision to pause fiscal adjustment this year will allow accommodating health, social, and development spending to support the recovery, complemented by accommodating monetary policy,” – IMF in its statement released on Monday.
The agreement in principal is set to lessen the exchequer’s pressure to finance a widened fiscal deficit and will likely see it re-balance its external financing sources, even as the country seems to be onboarding more debt that it’s revenue can sustain to repay.
With the covid-19 hitting hard on the Kenyan economy, which contracted about 5.7% then, revenue collection in the first six months to December fell short of Kes 907.7 billion target by Kes 107.6 billion underlining the challenges of the Covid-19 pandemic’s disruptions on businesses activities in the country.