Kenya set for Sh131 billion new IMF financing June

Central Bank of Kenya (CBK) Governor Kamau Thugge.  

Photo credit: File | Nation Media Group

Kenya is set for Sh131 billion ($1 billion) in new financing from the IMF in June at the end of the seventh review of its multi-year programme with the multilateral lender.

The disbursement awaiting both staff-level agreements and the nod from the IMF executive board is expected to be the largest access yet from the programme approved in 2021.

“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,” Central Bank of Kenya (CBK) Governor, Kamau Thugge said on Thursday.

The IMF had scheduled the disbursement of $709.7 million special drawing rights to Kenya or $936.83 million (Sh122.8 billion) in May 2024 under the extended fund facility (EFF), the extended credit facility (ECF) and the resilience and sustainability fund (RSF).

So far, the IMF has disbursed a cumulative Sh341 billion ($2.6 billion) from the ECF/EFF arrangements from February 2021 through to January 2024.

Disbursement from the IMF’s multi-pronged funds is expected to ease from the second half of 2024 up to the end of the arrangements in April 2025 with only a total of Sh42.3 billion ($323 million/244.7 million SDRs) in disbursements planned in October 2024 and in March 2025.

The new inflows from the IMF are expected to complement fresh funding from the World Bank’s development policy operations— a facility used to meet emerging development resource requirements for countries under which Kenya now hopes to tap about Sh157.3 billion ($1.2 billion).

The expected funding from the World Bank is, however, lower than the previously projected disbursement of Sh196.7 billion.

According to the CBK, the World Bank is set to marginally trim its support under the DPO following Kenya’s successful issuance of a new Eurobond to settle a part of its maturing debut sovereign bond issued in 2014.

“The World Bank has been very kind to us having considered increasing DPO financing to $1.5 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,” added Dr Thugge.

Combined, the new financing from the pair of multilateral lenders is expected to boost CBK’s usable foreign exchange reserves to meet the statutory requirement of having at least four months of import cover.

Kenya’s official reserves have remained under pressure in recent months driven largely by increased debt service costs from rising interest rates. At present, the reserves stand at $7.1 billion (Sh931.2 billion) or an equivalent of 3.77 months of import cover.

The CBK expects the forex reserves buffer to rise above the statutory threshold equivalent to four months of import cover by year’s end.

“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,” the governor said.

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