Kenya, the IMF reach agreement for $1 bn access in credit

The International Monetary Fund (IMF) said it has reached a staff-level agreement with Kenya that would provide the cash-strapped government with access to another $1 billion in credit. Kenya is labouring under a public debt mountain of $70 billion but its loan repayments have jumped as the local shilling slumped to all-time lows against the dollar.

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The IMF deal is subject to approval in July 2023

In a bid to ease the pressure on its finances, the government of President William Ruto has drawn up a 3.6-trillion-shilling ($26.2 billion) budget for 2023/24 with proposed new taxes expected to generate 289 billion shillings. The IMF deal, which is subject to approval by its board in July 2023, follows a mission by a team from the international lender to the country earlier this month.

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The IMF said in a statement issued on Tuesday that its total commitments to Kenya would increase to $3.52 billion from $2.43 billion previously agreed in April 2021. If approved in July, Kenya would have immediate access to $410 million, it said. Kenya has been grappling with a cost-of-living crisis, a punishing drought and the decline in the value of the shilling, and saw economic growth slow to 4.8 per cent last year from 7.6 per cent in 2021.

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“The government budget has been under pressure from shortfalls in revenue collection and challenging financing conditions,” the IMF said. The agency urged the government to reform state-owned enterprises such as loss-making national carrier Kenya Airways and utility company Kenya Power. Ruto’s government is aiming to reduce its budget deficit in part by introducing taxes on a range of goods including beauty products, gambling and various foodstuffs and fuel, measures criticised by the opposition for punishing ordinary Kenyans.

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While the IMF said it had a favourable medium-term outlook for the Kenyan economy, “significant challenges remain against the backdrop of slow global economic growth and tight financial conditions”.
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