Kenya has received an additional $938 million from the International Monetary Fund (IMF) to support its economic recovery from the effects of the drought, inflation, and global financial shocks. The funding, which still requires IMF board approval, will result in the IMF granting Kenya immediate access to around $682 million, the fund said in a statement on Wednesday.
The IMF funding is part of a larger financing package that the IMF agreed to boost by 45% to $3.5 billion in May 2022 and extend the duration of the 38-month program by 10 months to April 2025. The latest agreement lifts that total support to around $4.43 billion.
The IMF said the funding will help the government address its fiscal and external imbalances, boost its foreign exchange reserves, and repay a $2 billion Eurobond that falls due in June 2023. The government plans to make an early repayment of $300 million in December 2022.
The IMF praised the government’s reform program, which aims to enhance the policy framework, restore confidence, and ensure access to the global bond market. The fund also urged the government to implement a package of mutually reinforcing policies to sustain macroeconomic stability and inclusive growth.
Kenya’s economy has been hit hard by the worst drought in four decades, which has affected millions of livelihoods and increased food insecurity. The country has also faced high inflation, driven by rising global prices of food, fuel, and fertilizers, and a weakening of the shilling against the US dollar. The country’s political situation has also been tense, with the ruling party facing internal divisions and the opposition challenging the legitimacy of the 2022 presidential election.
Despite these challenges, Kenya’s economy has shown resilience and signs of recovery. The IMF projects the economy to grow by 5.2% in 2023 and 6% in 2024, driven by services and household consumption. The poverty rate has resumed its downward trend after rising earlier in the pandemic.
The IMF’s support to Kenya is part of its broader efforts to help sub-Saharan African countries cope with the impact of the global economic slowdown and the rising cost of living. The fund has provided more than $50 billion to the region between 2020 and 2022, more than twice the amount disbursed in any 10-year period since the 1990s. The fund has also called for more debt relief and aid from the international community to help the region overcome its financing challenges.
The IMF’s statement comes as Kenya prepares to host the 12th African Union Summit in Nairobi in January 2023, which will focus on the theme of “Accelerating Africa’s Recovery and Transformation”. The summit will provide an opportunity for African leaders to discuss ways to boost regional integration, trade, and investment, as well as to address the common challenges of climate change, security, and governance.
Source: Bloomberg
