The Washington-based executive board of the International Monetary Fund (IMF) is set to meet on Wednesday (January 17) to complete the sixth review of the institution’s arrangement with Kenya, including giving the green light on the disbursement of fresh funds.
The meeting will be in the backdrop of November’s staff level agreements on economic policies and reforms required to conclude the six reviews and augmentation of the arrangements.
The completion will see the multilateral lender wire an estimated Sh109 billion ($682.3 million), inclusive of the expansion of resources under the extended fund facility (ECF) and extended credit facility (ECF) and the first review of the resilience sustainability facility (RSF).
The approval of fresh funding would bring the IMF’s financial support disbursed under the arrangements to Sh427 billion ($2.68 billion).
Wednesday’s meeting will also see the IMF executive board completing fresh Article IV consultations with Kenyan authorities with the consultation representing a new assessment of the country’s economic health and a foretell of potential future financial problems.
A staff team from the IMF led by Haimanot Teferra visited Nairobi between October 30 and November 15 last year and held discussions on the pending reviews.
Fresh resources from the IMF are expected to be crucial to Kenya’s quest of successfully navigating the maturity of its inaugural Eurobond in June amid challenges in accessing the international capital markets.
Proceeds from the review are set to prop up Kenya's foreign exchange reserves, with the State expected to draw on the buffer to meet the Sh319 billion ($2 billion) Eurobond maturing in June.
Despite acknowledging the resilience of the economy, the IMF had deemed uncertainty over the country’s ability to make the bullet payment as a downward risk.
“Despite continued commitment to the implementation of the IMF-supported economic program which is broadly on track, uncertainty looms over Kenya’s effective access to international bond markets. This uncertainty is exerting substantial pressure on liquidity, primarily due to the sizable Eurobond maturity,” noted Haimanot Teferra.
Kenya’s program with the IMF is expected to result in a tighter fiscal stance, helping reduce debt vulnerabilities and achieve a present value debt to GDP ratio of 55 percent by 2029.
