Kenya has secured a new loan from the International Monetary Fund (IMF) totalling Sh153 billion ($1.5 billion) to be utilised in the next 24 months in case of external shocks.
However, the country does not have to draw the precautionary forex cash unless a real shock translates into a balance of payments problem.
That means only a major turbulence of the shilling would prompt Kenya to draw.
As per Kenya National Bureau of Statistics data of last September, the balance of payment had improved following a fall in imports and an increase in exports. The current account balance — showing the difference between the value of imports and exports — had fallen below 10 per cent of the gross domestic product. This reduced need for the cash.
“The Kenyan authorities have indicated they will continue to treat (the) arrangements as precautionary, and do not intend to draw on the new arrangements unless exogenous shocks lead to an actual balance of payments need,” said the IMF in a statement.
The board of the IMF immediately made available Sh77 billion for withdrawal. The balance can be drawn every six months when IMF review the extent to which Kenya adheres to the agreed programme of reforms.
When Kenya last asked for a similar precautionary facility in 2014, the amount made available was Sh70 billion ($688 million).
The cash was, however, not drawn even when there was a temporary balance of payment crisis last September with the shilling hitting a nominal exchange rate of 106 units to the dollar.
The IMF said in the latest press statement that Kenya’s economic growth was robust and the outlook was positive though it remained vulnerable to shocks.
“Kenya’s recent growth performance remains robust and the outlook is positive. Despite positive policy steps undertaken under the current Fund-supported programme, the economy remains vulnerable to shocks, reflecting less favourable global financial market conditions, as well as continued security threats and potential extreme weather event,” said the IMF.
The institution noted that Kenya was in the process of reducing its government spending and would, therefore, cut the fiscal deficit by three per cent of the GDP in the next two years. The deficit is currently about nine per cent.
The IMF said the country is committed to gradually reducing inflation to about five per cent from nearly seven per cent.