The International Monetary Fund (IMF) team and Kenyan authorities have agreed on the sixth evaluation of Kenya’s economic program under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements.
They have also resolved on an increase in access under the EFF/ECF reaching 130.3 percent of quota SDR 707.3 million, or about US$938 million – Ksh.142.7 billion, as well as the first review of the RSF.
This deal is still subject to IMF management clearance and adoption by the Executive Board, which is expected in January 2024.
Following the completion of the IMF Executive Board’s sixth review, Kenya would have immediate access to US$682.3 million, including the augmentation of access under the EFF/ECF arrangements (SDR469.25 million) and the first review of RSF (SDR45.23 million).
This would bring the total IMF financial assistance provided under the EFF/ECF and RSF agreements to SDR2.02 billion (about US$2.68 billion).
“The global financing conditions for frontier economies are tightening and global geopolitical tensions are compounding the challenges from the pandemic’s legacy and multi-season drought, further straining Kenya’s balance of payments and fiscal financing requirements,” according to the International Monetary Fund’s Haimanot Te
The authorities’ aggressive reform agenda aims to boost macroeconomic stability and restore confidence in order to gain access to international borrowing markets.
Kenya’s economy has showed resilience, with real GDP increasing by 5.4 percent in the first half of 2023, mainly primarily to a significant recovery in the agricultural sector following the resumption of rains.
A rebound in the tourism industry to pre-COVID-19 levels, resilience in remittances, a decline in imports, and a real exchange rate depreciation have all contributed to the narrowing of the external current account deficit. Since July, headline inflation has stayed between 2.5 to 7.5 percent, which is the desired range.
Although there has been a persistent dedication to carrying out the IMF-backed economic plan, which is essentially progressing as planned, doubts persist regarding Kenya’s ability to get access to global bond markets.
Liquidity is under significant strain from this uncertainty, mainly because of the huge Eurobond that matures in 2024.
Kenya is actively seeking out more funding from commercial sources, the IMF, and development partners while stepping up efforts to improve macroeconomic policy and carry out structural reforms.