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Treasury, CBK kept suspension of Sh152bn facility secret

Treasury CS Henry Rotich (left) and CBK governor Dr Patrick Njoroge. PHOTOS | FILE | NMG
Treasury CS Henry Rotich (left) and CBK governor Dr Patrick Njoroge. PHOTOS | FILE | NMG 

Kenya’s access to a $1.5 billion (Sh152 billion) precautionary facility at the International Monetary Fund (IMF) was suspended seven months ago due to non-compliance with fiscal deficit targets, the fund has revealed.

The IMF resident representative in Kenya, Jan Mikkelsen, told agencies on Tuesday that access to the facility has not been available to the government since mid-June, a fact both Treasury and the Central Bank Kenya (CBK) have kept hidden from the public.

Kenya had received approval to access the facility in March 2016 as a safeguard in case of shocks to the economy, especially the currency whose stability is majorly pegged on availability of a healthy flow of foreign exchange.

Touted as safeguard

CBK has maintained in its regular briefings on the monetary policy—the last one coming last month— that the facility remains available to Kenya, while the Treasury has also regularly touted it as one of the safeguards against economic shock.

Kenya has however not drawn on the facility in the past two years.

The IMF had pegged a condition for access to the facility - that Kenya would reduce its fiscal deficit to less than four per cent of GDP by the fiscal year ending June 2019, but the budget financing gap has instead remained stubbornly high at 8.9 per cent.

The failure to narrow the deficit is partly due to a high recurrent expenditure bill and heavy spending on projects last year as the government sought to deliver on promises to the electorate ahead of the General Elections.

Key CBK Indicative Exchange Rates Used: $1 = Sh101.3