The International Monetary Fund approved the disbursement of a $235.6 million loan to Kenya as the East African nation met the lender’s targets and made progress in addressing debt vulnerabilities.
The approval brings the IMF’s total disbursements to Kenya to $1.21 billion, out of a total of about $2.34 billion available under a 38-month program approved in April 2021, the Washington-based lender said in an emailed statement on Monday. The financing was approved after the fund completed its latest review of the program in April.
“Despite the resilient economic recovery, the program remains subject to downside risks, including from deeper disruptions from the war in Ukraine, unsettled global market conditions, and an increase of food insecurity,” the IMF said.
“Continued steadfast commitment to prudent policies and advancing structural reforms remains essential to maintain macroeconomic stability and safeguard Kenya’s positive medium-term prospects,” it said.
Kenya requested waivers on some of the program’s conditions before the review, after the government failed to fulfill key commitments, including establishing a central government payroll and making public the ownership details of companies that are awarded public tenders as a way to curb corruption, Business Daily reported July 13.
The lender estimates that economic growth in Kenya will slow to 5.7% this year, after growing 7.5% in 2021, which was the fastest pace in more than a decade.
Inflation is seen accelerating to an average 7.3%, fueled by the surge in food and fuel prices spawned by Russia’s war with Ukraine, and the worst drought in four decades in Kenya.
The country is using the credit facility to support its budget. The government had included the loan in its external financing for the fiscal year ended June 30, but the lender’s executive board didn’t approve it by end of the period. Kenya dropped a plan to borrow $1 billion from commercial banks by the end of June because of unfavorable pricing, having earlier scrapped a plan for a eurobond of similar size.
Yields on Kenya’s eurobonds due 2024 breached the 20% mark for the first time last week, and traded at 21.% on Monday.