Kenya is on course to secure a Ksh 52.4 billion from the International Monetary Fund (IMF) to cover external financing needs resulting from drought and challenging global financing conditions
This is after an agreement between government officials and IMF staff to proceed with the fourth credit support under the 38-month Ksh 283 billion ($2.34 billion) Extended Fund Facility (EFF) and Extended Credit Facility (ECF) approved by the IMF Executive Board in April last year.
The latest approval brings total loan disbursement under the arrangement to Ksh 187.3 billion.
The loan also includes a proposed augmentation of access of Ksh 15.3 billion to cover external financing needs resulting from drought and challenging global financing conditions, the IMF said.
However, amid prevailing drought, elevated inflation and global shocks, IMF projects the economy to register a 5.3pc growth this year.
“Staff projects growth at 5.3pc 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,” said IMF.
The lender expects budgetary cuts in the supplementary budget for FY2022/23 to modestly reduce the deficit from 5.9pc of GDP and increase allocations to mitigate the effects of prevailing drought where 5 million are on the brink of starvation.
“Steadfast progress in revenue mobilization, anchored on the medium-term revenue strategy that is under development, as well as tight spending controls will be important to deliver further deficit reduction and put the debt/GDP ratio firmly on a downward trajectory,”
With the runaway inflation that jumped to 9.6pc in October, IMF says the proactive monetary policy will help anchor macroeconomic stability.
“The central bank has promptly tightened monetary policy in the face of heightened inflationary pressures and has signaled determination to keep price expectations anchored. Continued vigilance and responsiveness to changing external conditions will alongside exchange rate flexibility be important given the unsettled global environment.”
The government is also expected to continue with the implementation of structural reforms such as the publishing of beneficial ownership information for awarded government contracts and reforming financially-troubled state-owned enterprises—including Kenya Airways and Kenya Power in order to enhance transparency and accountability.