By Haruna Gimba
The International Monetary Fund (IMF) has approved the disbursement of a $235.6m (about R4.02bn) loan to Kenya as the East African nation has met the lender’s targets and made progress in addressing debt vulnerabilities.
The approval brings the IMF’s total disbursements to Kenya to $1.21bn (R20.64bn), out of a total of about $2.34bn (R39.87bn) available under a 38-month programme 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.
“Despite the resilient economic recovery, the programme remains subject to downside risks, including deeper disruptions from the war in Ukraine, unsettled global market conditions and an increase in 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.”
Kenya met all the performance targets for the period through December, but requested waivers due to “the timing of the review” as final data to evaluate the end-June 2022 quantitative criteria was not yet available. Those benchmarks will be assessed in the next review.
Some of the delays in the programme’s goals include tackling financial weakness at state-owned companies Kenya Airways and Kenya Power and Lighting, the fund said.
The government is also yet to conclude an audit of Covid-19-related spending and publication of the ownership of companies awarded public contracts, a step the IMF said was required to enhance transparency in governance.
The government included the loan tranche in its external financing for the fiscal year ended June 30, but the lender’s approval for a disbursement only came after that period ended. Kenya was banking on the cash after scrapping plans to borrow $1bn (R17.05bn) from commercial banks in the past fiscal year, having earlier abandoned a eurobond issue of a similar size due to unfavourable pricing.
Kenya is at high risk of debt distress and reducing vulnerabilities is a central goal of the IMF programme. The country also plans to replace the current 10-trillion-shilling (R1.44-trillion) debt ceiling with an anchor based on GDP, the IMF said.
The lender estimates economic growth in Kenya will slow to 5.7% this year, after expanding 7.5 per cent in 2021, the fastest pace in more than a decade. Inflation is seen accelerating to an average 7.3 per cent, fuelled by Russia’s invasion of Ukraine and the worst drought in four decades in Kenya.
Yields on Kenya’s eurobonds due in 2024 breached the 20 per cent mark for the first-time last week and traded at 21.1 per cent by 4.25pm in Nairobi.
