NAIROBI, June 11 (Xinhua) -- The International Monetary Fund (IMF) said Tuesday it had reached a staff-level agreement with Kenya and would unlock 976 million U.S. dollars if approved.

The loan facility which is subject to approval by the IMF executive board would bring its total funding under the existing Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements to 3.6 billion dollars, the IMF said in a statement.

It said the completion of the second review under the Resilience and Sustainability Facility (RSF) would enable Kenya to immediately access 120 million dollars.

The IMF team led by Haimanot Teferra who held discussions with the Kenyan authorities in April and May said it reached a staff-level agreement on a comprehensive policy package needed to complete the seventh review of Kenya's economic program under the EFF/ECF arrangements and the second review of the Resilience and Sustainability Facility (RSF) arrangement.

"Growth recovered in 2023 with real GDP growing by 5.6 percent, supported by a strong recovery in agriculture and resilience in the services sector following the return of rains after the severe droughts in 2021-2022," Teferra said.

She, however, said the unfortunate losses of lives, displacement of people, and destruction of infrastructure and agricultural land from the recent floods have strained resources and highlighted the urgent need for comprehensive disaster risk management as well as support from both national and international stakeholders to respond to the immediate needs and rebuild a more resilient infrastructure.

Teferra said headline inflation has decelerated to 5.1 percent in May, aided by lower food prices, stabilization of fuel pump prices, appreciation of the exchange rate, and base effects from last year's electricity tariff adjustments.

Core inflation, however, remains persistent, she said, noting that refinancing risks associated with the June Eurobond have dissipated following a successful partial buyback from the proceeds of a new Eurobond issuance in February.

"In view of Kenya's buyback of a significant share of the 2024 Eurobond using proceeds from a new issuance, which alleviated near-term exceptional balance of payment needs, staff and the authorities agreed to bring cumulative access under the EFF/ECF arrangements within the normal limits and a recalibration of access towards the more concessional financing under the ECF, consistent with the Fund's policy on blended access," Teferra said.

The disbursement of the funds is expected to boost the country's foreign exchange reserves which according to the Central Bank of Kenya (CBK) reached 4.2 billion dollars in 2023.

The IMF said the CBK's initiatives to enhance the functionality of the foreign exchange and money markets have contributed to improved liquidity and better functioning of these markets while CBK's efforts to build forex reserves will strengthen external buffers.

"Exchange rate flexibility and further efforts to develop and improve the functioning of the forex market would continue to reduce the costs to the real economy from large spreads and excess forex demand while encouraging capital inflows and reducing outflows," Teferra said.

According to the IMF, the medium-term outlook remains favorable and predicated on advancing reforms to boost exports and fiscal revenues, rebuild buffers, and strengthen the economy's ability to withstand external shocks.

It said structural and governance reforms and sustaining efforts to enhance resilience, including to climate shocks, will also help support macroeconomic stability. Enditem

Related

Go to Forum >>0 Comment(s)