The International Monetary Fund (IMF) on Thursday, November 16, confirmed that it had reached preliminary agreement to expand its financing to Kenya by additional Ksh142.7 billion.
In a statement seen by The Kenya Times, IMF’s Chief to Kenya Haimanot Teferra announced that the body had reached a staff-level agreement with Kenyan authorities on the expansion of its financing by about US$938 million.
However, the agreement is still subject to approval and consideration by the IMF Executive Board.
With the new agreement, Kenya would have immediate access to $682 million (Ksh 95.5 billion) much to the relief of the government which has lately experienced liquidity crunch.
“I am pleased to announce that the IMF team and the Kenyan authorities have reached staff-level agreement on…. an augmentation of access under the EFF/ECF totaling 130.3 percent of quota SDR 707.3 million, about US$938 million,” the IMF Chief to Kenya stated.
As per the announcement, the loan will be an expansion of the Extended Fund Facility (EFF) loan facilities that have been in place since 2021.
The government had requested for the expansion of the loan to help in boosting its chances of securing funding amid looming crisis brought by the maturing multi-billion Euro bond debt.
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According to IMF, Kenya is facing a major test posed by the maturing bond and pressure it would exert on the budget. As such, Kenya has turned to international financiers and development financiers to raise money in a bid to maintain effective access to bond markets.
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“This uncertainty is exerting substantial pressure on liquidity, primarily due to the sizeable Eurobond maturing in 2024,” the IMF representative stated.
“Against this backdrop, the authorities are actively mobilizing additional financing from their development partners, the IMF, and commercial sources while concurrently intensifying their efforts to enhance macroeconomic policies and implement structural reforms,” the IMF statement read in part.
IMF comes in handy amid liquidity crunch
The agreement, IMF noted, came after a fact-finding mission involving Kenyan authorities carried out by a team of the institution’s staff members.
Prior to reaching the agreement, IMF held discussions with government officials on the various measures and policies adopted to ensure sustainability.
The also lender noted that the government of Kenya has demonstrated adherence to the program’s targets and reform objectives as agreed.
In early November, David Ndii- the Chairman of the Presidential Economic Advisors Council had hinted at the additional loan from the multinational lender.
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Speaking during a panel discussion on November 7, Ndii expressed his confidence that Kenya would meet its debt financing obligations- noting that IMF had proven important amid the liquidity crisis.
He stated that Kenya’s situation would have been worse without IMF’s input and that the state would have probably defaulted the Eurobond due for maturity next year.
“Why are we so proactive on the IMF program. Without the IMF we would probably default- let us be honest,” he stated.
“As of now the 2024 Eurobond refinancing is fully financed.”
