IMF approves Sh261b fresh loan for Kenya

The economy is slowly picking up after last year's slump due to the effects of the coronavirus pandemic. [Stafford Ondego, Standard]

The International Monetary Fund (IMF) has approved a crucial Sh261 billion credit facility for Kenya under a three-year programme.

The money is expected to help the country reboot the economy following the adverse effects of the Covid-19 pandemic amid shrinking revenues.

In a statement released on Monday, the IMF said the combined 38-month programme under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) is also aimed at helping the country reduce its debt vulnerabilities.

The staff-level agreement is a culmination of two virtual meetings between Kenyan authorities and an IMF team led by Mary Goodman from December 9 to 17 last year and February 4 to 15 this year.

“I am pleased to announce that the Kenyan authorities and the IMF mission team have reached agreement on economic and structural policies that would underpin a 38-month programme under the EFF and ECF arrangements for about $2.4 billion (Sh261 billion),” said Ms Goodman.

The team met senior government officials, including the National Treasury Ukur Yatani Cabinet Secretary, the Governor of Central Bank of Kenya Dr Patrick Njoroge and Head of Public Service Joseph Kinyua.

The agreement now awaits the approval of the Executive Board, the IMF’s highest decision-making organ.

The programme will also see Kenya undertake some significant restructuring of some of its struggling State-owned enterprising reminiscent of the 1990s-style structural adjustment programme that left thousands of public servants without jobs.

However, Kenyan authorities have requested some leeway to prop up some of the corporations that have been hit hard by the Covid-19 pandemic, with the National Treasury releasing Sh26 billion to recapitalise cash-strapped Kenya Airways.

Another Sh500 million worth of equity was sunk into the Agricultural Finance Corporation (AFC), a State corporation that lends to farmers.

The programme will see the country tighten its belt with spending cuts and increased taxes in what is aimed at reducing debt vulnerabilities and safeguarding resources to protect the vulnerable groups. 

The programme is also expected to boost the country’s ongoing efforts at fighting corruption, strengthen the monetary policy framework and supporting financial stability.

Kenya plans to use the money to help turbo-charge the economy which has affected by the pandemic.

The government has put together a Sh930 billion war chest to fight off the adverse effects of the pandemic. 

Should Kenya receive the funds from the IMF, it will have got a total of Sh340 billion from the Bretton Woods institution since Covid-19 pandemic hit in early 2020.

In May last year, the IMF gave Kenya Sh79 billion through the Rapid Credit Facility to help deal with help with the negative effects of the pandemic.

National Treasury also expects some Sh85 billion from the World Bank, another Bretton Woods institution.

Previously, the country had a precautionary credit arrangement with the IMF, which ended after Kenya flouted some of the conditions, including failure to keep its debt low.

Despite acknowledging that the economy will struggle to find its footing in the next financial year starting July, the National Treasury has pushed up its tax collection estimates in its final Budget Policy Statement for 2021 compared to the draft estimate that was released earlier.

Most of the upward adjustments come from ministerial appropriations-in-aid (AIA), or fees and fines charged by state corporations.