NAIROBI, Kenya – Kenya is poised to receive a long-awaited $611 million (Sh79 billion) loan from the International Monetary Fund (IMF) by October 30, following confirmation from Central Bank of Kenya Governor Kamau Thugge that the country has met all the requirements for disbursement.
The funds, part of the IMF’s Extended Fund Facility (EFF) and Extended Credit Facility (ECF), have been delayed due to political turbulence and ongoing economic reforms.
Speaking from Washington, D.C., where he is attending the Bretton Woods Institutions’ annual meetings, Thugge expressed optimism that the review process would conclude successfully.
“We’ve achieved all that was needed for the reviews to be completed. Obviously, after the review there are still the targets for December,” Thugge said in an interview with Reuters.
The IMF withheld the release of the funds earlier this year despite a staff-level agreement reached in June, citing widespread protests in Kenya over the Finance Bill 2024.
The bill’s controversial provisions and subsequent withdrawal created uncertainty around Kenya’s fiscal policy, prompting the IMF to hold off on final approval.
The Kenyan government had been banking on the IMF loan to help plug a Sh344 billion budget gap in the current fiscal year.
The delay, alongside an absence of domestic tax reforms due to the bill’s withdrawal, has forced the government to implement significant budget cuts, slashing Sh200 billion from the 2024/25 budget to bring it to Sh3.85 trillion.
In September, an IMF delegation led by Haimanot Teferra concluded discussions with Kenyan authorities, expressing satisfaction with the country’s economic reforms.
Teferra noted the IMF’s ongoing commitment to support Kenya’s efforts, saying, “We remain fully committed to supporting the authorities on their efforts to identify a set of policies that could support the completion of the reviews under the ongoing program as soon as feasible.”
Despite public frustration over stringent IMF conditions—often linked to the introduction of higher taxes—Governor Thugge maintained that Kenya would likely seek a new financing arrangement with the IMF once the current program expires in April 2024.
The specifics of the new program, including its size and duration, would depend on Kenya’s balance of payments and the scope of future reforms.
Thugge was positive about the country’s economic outlook, particularly regarding inflation and foreign exchange reserves. He noted that inflation, which stood at 3.6% in September, was expected to drop further, while foreign exchange reserves had risen to $8.6 billion (Sh1.09 trillion), covering 4.3 months of imports.
This marks an improvement from earlier in October when reserves were at $8.25 billion (Sh1.06 trillion).
The Kenyan shilling, which has faced significant pressure in recent months, has also stabilized against major international currencies, providing further confidence in the country’s macroeconomic stability.
Earlier this month, the Central Bank of Kenya cut its benchmark interest rate by 75 basis points to 12%, following a similar rate cut in August.
This marks a shift in monetary policy aimed at supporting economic recovery, and represents the first rate cut in four years.
The funds, part of the IMF’s Extended Fund Facility (EFF) and Extended Credit Facility (ECF), have been delayed due to political turbulence and ongoing economic reforms.
Speaking from Washington, D.C., where he is attending the Bretton Woods Institutions’ annual meetings, Thugge expressed optimism that the review process would conclude successfully.
“We’ve achieved all that was needed for the reviews to be completed. Obviously, after the review there are still the targets for December,” Thugge said in an interview with Reuters.
The IMF withheld the release of the funds earlier this year despite a staff-level agreement reached in June, citing widespread protests in Kenya over the Finance Bill 2024.
The bill’s controversial provisions and subsequent withdrawal created uncertainty around Kenya’s fiscal policy, prompting the IMF to hold off on final approval.
The Kenyan government had been banking on the IMF loan to help plug a Sh344 billion budget gap in the current fiscal year.
The delay, alongside an absence of domestic tax reforms due to the bill’s withdrawal, has forced the government to implement significant budget cuts, slashing Sh200 billion from the 2024/25 budget to bring it to Sh3.85 trillion.
In September, an IMF delegation led by Haimanot Teferra concluded discussions with Kenyan authorities, expressing satisfaction with the country’s economic reforms.
Teferra noted the IMF’s ongoing commitment to support Kenya’s efforts, saying, “We remain fully committed to supporting the authorities on their efforts to identify a set of policies that could support the completion of the reviews under the ongoing program as soon as feasible.”
Despite public frustration over stringent IMF conditions—often linked to the introduction of higher taxes—Governor Thugge maintained that Kenya would likely seek a new financing arrangement with the IMF once the current program expires in April 2024.
The specifics of the new program, including its size and duration, would depend on Kenya’s balance of payments and the scope of future reforms.
Thugge was positive about the country’s economic outlook, particularly regarding inflation and foreign exchange reserves. He noted that inflation, which stood at 3.6% in September, was expected to drop further, while foreign exchange reserves had risen to $8.6 billion (Sh1.09 trillion), covering 4.3 months of imports.
This marks an improvement from earlier in October when reserves were at $8.25 billion (Sh1.06 trillion).
The Kenyan shilling, which has faced significant pressure in recent months, has also stabilized against major international currencies, providing further confidence in the country’s macroeconomic stability.
Earlier this month, the Central Bank of Kenya cut its benchmark interest rate by 75 basis points to 12%, following a similar rate cut in August.
This marks a shift in monetary policy aimed at supporting economic recovery, and represents the first rate cut in four years.
