Nairobi — Kenya is set to receive USD433million(Sh52.7billion) from the International Monetary Fund (IMF) as part of the USD2.34 billion(Sh284.8billion) facility approved in April last year.
The agreement is subject to the approval of IMF management and the Executive Board in the coming weeks.
“Upon completion of the Executive Board review, Kenya will have access to USD433 million, bringing the total IMF financial support under these arrangements to US$1,548 million,” IMF said in a statement.
The funds will assist Kenya to cover external financing needs resulting from drought and challenging global financing conditions.
“The Kenyan economy has been resilient in the face of a challenging environment. Food insecurity has increased on severe drought in parts of the country. Higher food and energy prices have pushed up inflation and pressured the external position,” the IMF said.
The multilateral lender noted that the peaceful completion of the country’s elections lifted uncertainty and credit to the private sector is expanding.
IMF projects growth at 5.3 percent in 2022 amid domestic policy tightening and a global slowdown that are likely to also weigh on growth in 2023.
The medium-term outlook remains favorable, supported by proactive reform efforts by the new government.
“There has been good progress on fiscal adjustment needed to address debt vulnerabilities though pressures remain elevated. The overall deficit on cash basis declined from 8.2 per cent of GDP in FY2020/21 to 6.2 percent of GDP in FY2021/22,” said IMF.
Despite the improved fiscal adjustment, IMF noted that a constrained borrowing environment for the country meant that planned external commercial financing did not materialize.
“The lack of funds contributed to 0.7 per cent of GDP in unpaid obligations that were carried over to FY2022/23. Significant unbudgeted spending in the early months of this fiscal year, much of it for fuel subsidies, pose an additional challenge,” it said.
Looking forward, the IMF expects Kenya to continue with structural and governance reforms.
This includes completing efforts underway to publish beneficial ownership information for awarded government contracts, which will be a major step towards greater transparency and accountability.
Key among them is the reform of financially-troubled state-owned enterprises–including Kenya Airways and Kenya Power and Lighting Company.