The International Monetary Fund (IMF) has reached a staff-level agreement with Kenya to expand its financing to the country by $938 million (Sh142.6 billion) to support its economic reform programs.
If approved, Kenya will have access to a total of $3.88 billion, which would bring its total funding under the existing Extended Fund Facility and Extended Credit Facility arrangements to $4.43 billion, the IMF said.
“The agreement is subject to IMF management approval and consideration by the Executive Board, which is expected in January 2024.
Upon completion of the sixth reviews by the IMF Executive Board, Kenya would have immediate access to SDR 514.48 million (about US$682.3 million), including from the augmentation of access under the EFF/ECF arrangements (SDR469.25 million) and first review of RSF (SDR45.23 million).
This would bring total IMF financial support disbursed under the EFF/ECF and RSF arrangements to SDR2.02 billion (about US$2.68 billion),” said IMF’s Chief to Kenya Haimanot Teferra.
| International Monetary Fund (EFF) and ECF Financing Programme | ||
| Date | Amount Received (USD mn) | Amount Received (Kshs bn, 1 USD= Kshs 152.1) |
| Apr-21 | 307.5 | 46.8 |
| Jun-21 | 407.0 | 61.9 |
| Dec-21 | 258.1 | 39.3 |
| Jul-22 | 235.6 | 35.8 |
| Nov-22 | 433.0 | 65.9 |
| Jul-23 | 415.4 | 63.2 |
| Nov-23* | 682.3 | 103.8 |
| Total Amount Received | 2,738.9 | 416.6 |
| Amount Pending | 1,141.1 | 173.6 |
| *Expected funds upon IMF management and executive board disbursement | ||
This comes as a reprieve as Kenya faces the task of repaying the 10-year Eur
The IMF said the loan will help Kenya address its urgent financing needs, reduce debt vulnerabilities, and advance structural reforms to boost growth and resilience.
“This uncertainty is exerting substantial pressure on liquidity, primarily due to the sizeable Eurobond maturing in 2024,” the IMF representative stated.
“Against this backdrop, the authorities are actively mobilizing additional financing from their development partners, the IMF, and commercial sources while concurrently intensifying their efforts to enhance macroeconomic policies and implement structural reforms,” the IMF statement read in part.
Fitch Ratings cautioned Kenya that its credit rating could be downgraded depending on how much of its foreign reserves it uses to repay its debt.
The agency said that using reserves to redeem the Eurobond would lower the import cover, which could affect Kenya’s rating negatively.
“Kenya still has sufficient reserves to meet its external debt obligations falling due in the near term, with useable foreign-exchange reserves at USD6.8 billion as of 2 November, around 3.7 months of import cover.
Deploying reserves to redeem the Eurobond would reduce import cover, which could still contribute to a downgrade of Kenya’s rating depending on the extent of the drawdown and the outlook for other sources of external financing.
However, we believe some of the government’s planned additional external financing will also materialise.”
Therefore, the Kshs 103.9 billion funds from the IMF would help Kenya to settle its foreign debt without depleting its hard currency reserves.