Kenya eyes Sh130b IMF funding in June

Central Bank of Kenya (CBK) and International Monetary Fund (IMF) will meet this June, potentially opening way for disbursement of a $1 billion (Sh129.5 billion) disbursement, Governor Kamau Thugge has said. He said an IMF team would be in the country upon which the deal is expected to be finalised.

“We expect to reach an agreement with the visiting IMF team with the executive board meeting set for early June, after which we expect a disbursement of at least $1 billion from the IMF,” Thugge said while speaking during a post-Monetary Policy Committee (MPC) press conference last week.

Thugge emphasised that the IMF’s visit and ensuing talks are vital for Kenya’s economic strategy and stability. He noted that the anticipated Sh129.5 billion disbursement would strengthen Kenya’s foreign exchange reserves, thereby boosting the nation’s economic resilience and import coverage capacity.

“We expect our foreign exchange reserves to rise by another $1 billion (Sh131.1 billion) by the end of December 2024 when we should have $8.1 billion (Sh1.06 trillion) of usable reserves and that could be equivalent to 4.1 months of import cover,” Thugge said.

Exchange reserves

As of April 4, the usable foreign exchange reserves stood at a satisfactory level of $7,148 million, equivalent to 3.8 months of import cover. And in line with the CBK’s statutory obligation to strive to maintain a minimum of 4 months of import cover. Thugge said the World Bank’s Development Policy Operation (DPO) for Kenya, initially projected at $1.5 billion (Sh194.2 billion), may see a reduction in the disbursed amount.

This adjustment is attributable to Kenya’s proactive measures in managing its Eurobond maturity through the issuance of an alternative bond.

“World Bank has been very kind to us having considered increasing DPO financing to Sh194.2 billion in part to address the maturity of the Eurobond in 2024 but since we were able to address the Eurobond through the issuance of another bond, it may be the case that the World Bank may not provide the full $1.5 billion,” Thugge said.

The DPO, which supports key policy and institutional reforms, aims to bolster Kenya’s fiscal consolidation efforts and promote green and inclusive growth.

IMF Executive Board is set to review the Extended Fund Facility (EFF), Extended Credit Facility (ECF), and the Resilience and Sustainability Facility (RSF) during its visit to Kenya. The EFF and ECF, which have disbursed about $2.04 billion (Sh264.2 billion) so far, were established to aid Kenya’s post-Covid-19 economic recovery and address debt vulnerabilities.

Fiscal strategy

This involved a fiscal strategy that balanced revenue generation with expenditure control, targeted growth revitalisation, addressed State-Owned Enterprises’ weaknesses, and aimed to restore market confidence, enhance fiscal risk management, strengthen external buffers, and improve governance.