The government is eyeing a drawdown of about $600 million (Sh77.9 billion) from the International Monetary Fund (IMF) when the institution’s executive board approves the seventh review of Kenya’s medium-term funding programme.
Central Bank of Kenya (CBK) Governor Kamau Thugge said yesterday that the IMF drawdown is part of the revised external borrowing target of Sh360 billion in the current year, with the government confident that it will meet revenue and fiscal deficit performance targets to unlock the funding.
In June, an IMF staff team concluded the seventh review under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF), and the second review under the Resilience and Sustainability Facility (RSF) programme.
The review, according to an IMF release, saw the total remaining funding under the EFF/ECF programmes adjusted to $976 million (Sh126.7 billion) and also unlocked $120 million (Sh15.6 billion) under the RSF. The programme runs until April 2025.
Dr Thugge has however put the total remaining amount under the IMF programme at $1.4 billion (Sh181.7 billion).
“We still have $1.4 billion from the IMF to be made between now and the end of the fiscal year. Under the seventh review, we expect something in the order of slightly above $600 million, and we do hope that a board meeting will be set soon so that those disbursements can be made,” said Dr Thugge in a briefing on Tuesday’s monetary policy committee meeting.
The government had expected the IMF executive board to meet sometime in mid-July to approve the funding drawdown, but the withdrawal of the Finance Bill 2024 and subsequent revisions of the budget in the face of youth-led anti-tax protests have caused a delay in the approvals.
This funding programme comes with several conditionalities targeting fiscal and monetary policy reforms for Kenya.
The CBK governor said yesterday that the government has met many of these targets, bar those touching on revenue performance.
On the monetary end, he said that the CBK met its target on net international reserves in December 2023 and June 2024 and is on pace to meet the same in December 2024.
On the fiscal end, he said that the government has met the agreed target on primary deficit through December 2023, but did not do so for June 2024.
“The one that has been problematic has been on the revenue side. We missed targets in December 2023 and June 2024… having said that, targets were very high. Performance through June of ordinary revenue was about 12 percent (growth) which is reasonable,” said Dr Thugge.
“The 15 percent ordinary revenue growth (projection) in the fiscal framework for this year is quite reasonable, and so we should be able to meet revenue targets and the consolidation path towards achieving the debt sustainability target and debt anchor of 55 percent debt to GPD ratio by 2029.”
He added that the Treasury met the targets on the amount of new debt and debt guarantees that it contracted in the period.
The revised budget for the 2024/2025 financial year shows a fiscal deficit of Sh773 billion, to be financed through domestic borrowing of Sh413 billion and external loans worth Sh360 billion. The deficit as a percentage of GDP is thus projected at 4.3 percent of GDP, falling to 3.3 percent in 2025/2026.
