The International Monetary Fund recently approved a $938 million expansion of its financing package to Kenya. The agreement grants the East African country immediate access to around $682 million, the fund said in a statement Thursday.
- The country intends to use the funding to strengthen its reserves before its $2 billion Eurobond payment in June.
- The proposed agreement between Kenya and the IMF is awaiting final approval from the Fund’s executive board in Washington, D.C.
- The board is expected to consider the agreement for approval in January 2024.
- If approved, Kenya will have access to a total of $3 billion, bringing its existing Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements to $4.43 billion.
Why this matters
- Kenya is currently navigating a liquidity crunch and investor uncertainty as it grapples with its ability to secure funding from financial markets before the bond’s maturity in June.
- The IMF noted that the lingering effects of the Covid-19 pandemic and climate change-induced droughts further obstruct Kenya’s economic path.
Haimanot Teferra, the head of the mission, said:
“The authorities’ strong reform program aims to enhance the policy framework substantially and restore confidence to ensure access to the global bond market. Steadfast implementation of a package of mutually reinforcing policies remains the key to sustain macroeconomic stability.”
- The program was approved in April 2021; Kenya received an extra $1 billion in May 2023.
- The IMF also agreed with Kenyan officials in May to extend the EFF and ECF arrangements.
- The extension will give Kenya an additional ten months, until April 2025, to meet all the requirements set by the IMF.
- Kenya will also access about $544 million under the Resilience and Sustainability Facility (RSF) to address climate change challenges. The total funding to Kenya under these three facilities amounts to around $3.5 billion.