Kenya is set to receive $410 million (Sh44billion), being the second payment of the overall $2.34 billion IMF loan approved in April.
Staff at the International Monetary Fund (IMF) cleared Kenya for the second phase of the Extended Fund Facility (EFF).
This is after the team led by Mary Goodman conducted a virtual mission to Kenya from April 29 to May 14 to discuss progress on reforms.
They also looked at the government’s policy priorities within the context of the first review of Kenya’s economic program supported by the IMF.
“The IMF staff team and the Kenyan authorities have reached a staff-level agreement on the first review of Kenya’s economic program under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF),” the mission statement read in part.
The staff-level agreement is subject to approval by the IMF management and the board in the coming weeks.
Early last month, IMF made an initial disbursement of Sh34 billion immediately after the board approved the 38-month programme, promising to send the second tranche before the close of the current financial year.
The IMF team that met Kenya’s top National Treasury and Central Bank of Kenya officials hailed the government’s decisive policy actions to contain the Covid-19 outbreak.
The actions helped to cushion the blow to the economy and maintained the momentum necessary to advance their economic reform agenda. With the easing of the third wave of infections compared to high levels seen into April, containment measures have been lifted,” the IMF team said.
They added that the IMF programme is designed to support Kenya accelerate and expand vaccinations.
“The economic recovery should be sustained, although the persistence of the pandemic suggests the pickup envisioned in 2021 will be slightly less strong than anticipated,” the statement read in part.
IMF staff now project the economy to expand by 6.3 per cent in 2021.
Even so, the coronavirus shock has unfortunately reversed some of the poverty reduction gains Kenya achieved in recent years and debt remains elevated.
“Nevertheless, it is important to keep in mind that Kenya’s prospects are strong, and in the medium-term growth is expected to settle at its potential of just above 6 per cent,” IMF said.
Overall, the authorities and the IMF agreed on the important role the programme is playing in supporting Kenya’s long-term economic vitality and in helping the country respond to shocks given that uncertainty about the future path of the pandemic continues to tilt economic risks to the downside.
“As for specific policies, the authorities have taken strong efforts to achieve their planned deficit path in a highly uncertain policymaking environment,” IMF said.
According to the report, Kenya met the fiscal balance target at the end-March by a wide margin and had fully implemented its planned tax policy measures, although, with continuing pressures from the pandemic, tax revenue yields were slightly below expectations.
The Financial Year 2021/2022 budget proposal is being aligned with the authorities’ ambitious multi-year plan to reduce debt-related vulnerabilities and it secures resources to support social spending.
Kenyan authorities are also developing a strategy to assess and manage risks to the budget from state-owned enterprises (SOEs), leveraging results of their ongoing financial evaluations of those firms facing the greatest challenges.
Kenya promised to shortly publish an audit of all Covid-related expenditures in Financial Year 2019/2020. It has also pledged to strengthen public accountability, and the public procurement portal.
“The Central Bank of Kenya (CBK) plans to capitalise on the improving outlook by setting out its strategy to strengthen Kenya’s monetary policy framework, supporting its flexible inflation targeting regime,” the report said.
The CBK’s continued close attention to financial sector soundness will reinforce banks’ ability to support the recovery.