The role of IMF partnership amid Kenya's economic resilience

President William Ruto and IMF Managing Director Kristalina Georgieva during a past meeting. [File, Standard]

The recently concluded International Monetary Fund (IMF)-World Bank Annual Meetings provided Kenya with an invaluable platform to showcase its resilience, recovery, and readiness for sustainable growth.

In discussions with global financial leaders, Kenya not only shared its economic journey but also demonstrated the strong fundamentals driving its economy forward.

The country’s strategic reforms under the Bottom-Up Economic Transformation Agenda (Beta) reveal an economic path that’s firmly grounded in data-driven strategies and a commitment to balanced, sustainable growth.

Like many economies worldwide, Kenya has faced substantial challenges, including rising prices, currency pressures, and increasing public debt. Yet the government has responded with targeted reforms across key sectors such as agriculture, micro, small, and medium enterprises (MSMEs), housing, healthcare, and the digital economy.

These initiatives are already yielding positive outcomes: in 2023, the economy grew by 5.6 per cent, up from 4.9 per cent in 2022 and surpassing the pre-pandemic growth rate of 4.7 per cent.

Looking ahead, Kenya projects a growth rate of 5.2 per cent in 2024 and 5.4 per cent in 2025, marking a forward-looking investment in the nation’s future rather than a mere rebound. This progress is not by accident. Kenya’s approach integrates strong economic principles with modern priorities, such as innovation, skills development, and policies that address real-world economic needs.

Investments in digital infrastructure and education help Kenyans keep pace with a rapidly evolving global economy, while prioritising MSMEs and local economies ensures that national policies translate into meaningful, positive changes for millions, fostering an economy that serves all Kenyans.

Kenya’s fiscal reforms, implemented in close partnership with the IMF, aim to create stability both in the short and long term.

This disciplined approach has strengthened confidence among domestic and international stakeholders alike. One

significant achievement in 2024 has been the successful control of inflation through the Central Bank’s Monetary Policy Committee (MPC).

As a result, inflation decreased from 6.8 per cent in September 2023 to 3.6 per cent in September 2024. This outcome reflects a careful calibration of the Central Bank Rate (CBR) to balance economic growth with inflation control, highlighting the government’s proactive, balanced approach to economic stability. Furthermore, the shilling has stabilised, appreciating from Sh160.8 to a range of Sh128-131 against the US dollar,

which has alleviated import costs and contributed to a more balanced trade. Additionally, Kenya’s foreign exchange reserves stand at $7.97 billion (Sh1.02 trillion), and remittances from Kenyans abroad have risen by 17 per cent, giving the economy a robust buffer against external shocks and underscoring its resilience. Kenya acknowledges the challenges that lie ahead. For example, two delays in the Finance Bill in August 2024 led to a revenue shortfall of Sh29.6 billion.

This required a temporary adjustment in the fiscal framework, projecting revenue at 16.9 per cent of GDP and expenditures at 21.5 per cent, with a fiscal deficit of 4.3 per cent. These adjustments are part of a broader strategy to reduce the deficit to below three per cent over the medium term, underscoring Kenya’s commitment to fiscal discipline. Increasing revenue remains a high priority and the Kenya Revenue Authority (KRA) is actively implementing automation and compliance measures to boost revenue collection without overburdening businesses. Kenya is also advancing public-private partnerships (PPPs) to responsibly continue infrastructure development without accumulating excessive debt.

The international community has recognised and endorsed Kenya’s economic strategy. The IMF, along with other partners, has provided both technical and financial support, signalling a high level of trust in Kenya’s disciplined, data-driven reforms. This endorsement from global partners validates Kenya’s approach as one that can withstand scrutiny and achieve tangible outcomes. Equally essential is the Kenyan government’s commitment to keeping citizens and stakeholders informed.

Transparency and effective communication about economic progress and challenges foster trust and engagement, ensuring that all Kenyans feel included in the national journey. When citizens understand and engage with the government’s economic vision, the collective effort to address shared challenges becomes more effective and meaningful, maximising benefits for everyone. Kenya’s economic path is a blend of ambition and responsibility, facing today’s challenges while building a solid foundation for tomorrow. With sound policies, strong partnerships, and an unwavering commitment to growth, Kenya is not only prepared to endure but also to thrive, aiming to create a prosperous future for all its citizens.

The IMF’s recent approval of the combined seventh and eighth reviews of Kenya’s Extended Fund Facility (EFF) and Extended Credit Facility (ECF) programs underscores this progress.

Along with these programmes, the IMF Executive Board also approved the second review of the Resilience and Sustainability Facility (RSF). This approval acknowledges Kenya’s prudent economic policies and the significant strides made in implementing critical reform measures and commitments under these programmes.

The IMF’s endorsement has triggered an immediate disbursement of $485.8 million under the EFF/ECF and an additional $120.3 million (Sh15.5 billion) under the RSF, totalling $606.1 million (Sh78.41 billion). This funding represents a strategic recalibration of Kenya’s financing needs, as the country opted out of exceptional financing previously approved by the Board in January 2024 following the successful settlement of the maturing Eurobond in June 2024.

These resources will reinforce Kenya’s macroeconomic stability and enhance its resilience against external shocks by bolstering foreign reserves, providing essential budget support, and strengthening climate resilience efforts.