IMF boosts shilling with release of Sh8.5bn forex loan
IMF Kenya resident representative Ragnar Gudmundsson. Photo/FILE
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IMF officials announced Tuesday they had completed review of the status of Kenya’s economy and implementation of the ongoing currency support programme. They noted that Kenya had implemented agreed economic reforms and policies.
The IMF said Kenya had faced multiple challenges in the past few years including the post-election conflict of 2008, repeated droughts, global financial crisis and regional security threats.
The economic policies adopted by the State will likely lead to GDP growth averaging five per cent in the next three years, IMF said.
The International Monetary Fund has approved disbursement of an additional Sh8.5 billion ($100 million) foreign exchange support loan, further boosting the shilling, which has been strengthening since the peaceful conclusion of the elections.
IMF officials announced Tuesday they had completed review of the status of Kenya’s economy and implementation of the ongoing currency support programme. They noted that Kenya had implemented agreed economic reforms and policies.
Kenya currently has a programme with the IMF dubbed the Extended Credit Facility (ECF) through which Sh65 billion ($760 million) will be loaned to the Central Bank of Kenya. The new disbursement will bring the total so far released under the programme to $650 million. This amounts to about 10 per cent of the forex reserves that are managed by the CBK.
The multilateral lender said the current monetary policy easing stance was supported by the declining inflation rate and the need to encourage growth in bank lending.
In a commentary published in the Business Daily, IMF Kenya resident representative Ragnar Gudmundsson noted that the success of the political transition following the March 4 General Election offered the opportunity for the country to make progress towards becoming an emerging market economy.
The IMF said Kenya had faced multiple challenges in the past few years including the post-election conflict of 2008, repeated droughts, global financial crisis and regional security threats.
But the enactment of the new Constitution in 2010 was a response to the aspirations of Kenyans, the institution said. The implementation of the new dispensation has, however, brought with it increased pressure on the national budget, the IMF noted.
But increased revenue collection has eased some of this pressure.
The primary fiscal deficit has reduced markedly from 3.8 per cent of GDP in 2010 to 1.5 per cent in 2011 and 2.2 per cent in 2012.
This, the IMF said, has led to lower net public-debt-to-GDP ratio, which stood at 46 per cent in 2010 and currently stands at 43 per cent.
The IMF said the debt-to-GDP ratio is projected to further decline to 41 per cent by 2015.
The economic policies adopted by the State will likely lead to GDP growth averaging five per cent in the next three years, IMF said.
The lender announced that Kenya had received foreign direct investment of close to Sh43 billion ($500 million), improving the country’s attraction as an investment destination.
Also attracting investors were the country’s role as a financial services hub, its strong human capital base, recent discoveries of mineral wealth and the prospects of an integrated EAC market.
