The International Monetary Fund (IMF) has approved a crucial 261 billion shillings credit facility for Kenya as part of a three-year program.
The money is expected to help the country restart the economy following the adverse effects of the Covid-19 pandemic amid declining income.
In a statement on Monday, the IMF said the combined 38-month program under the Extended Financing Facility (EFF) and Extended Credit Facility (ECF) was also aimed at helping the country reduce the vulnerability of its economy. debt.
The staff-level agreement is the culmination of two virtual meetings between the Kenyan authorities and an IMF team led by Mary Goodman from December 9-17 last year and February 4-15 this year.
“I am pleased to report that the Kenyan authorities and the IMF mission team have reached an agreement on economic and structural policies that would underpin a 38-month program under the EFF and ECF agreements for approximately 2 , $ 4 billion (261 billion shillings), ”Ms. Goodman said. .
The team met with senior government officials, including Cabinet Secretary of the National Treasury Ukur Yatani, Central Bank of Kenya Governor Dr Patrick Njoroge and Civil Service Chief Joseph Kinyua.
The deal is now awaiting approval from the Executive Board, the IMF’s supreme decision-making body.
The program will also see Kenya undertake a major restructuring of some of its ailing state-owned enterprises, reminiscent of the structural adjustment program of the 1990s that left thousands of civil servants jobless.
However, Kenyan authorities have asked for some leeway to support some of the companies that have been hit hard by the Covid-19 pandemic, with the National Treasury releasing 26 billion shillings to recapitalize cash-strapped Kenya Airways.
Another capital worth 500 million shillings was invested in the Agricultural Finance Corporation (AFC), a state-owned company that lends to farmers.
The program will see the country tighten its belt with spending cuts and increased taxes in a bid to reduce debt vulnerabilities and preserve resources to protect vulnerable groups.
The program is also expected to boost the country’s ongoing efforts to fight corruption, strengthen the monetary policy framework and support financial stability.
Kenya plans to use the money to help boost the economy affected by the pandemic.
The government has assembled a war chest of 930 billion shillings to combat the adverse effects of the pandemic.
If Kenya receives the funds from the IMF, it will have obtained a total of 340 billion shillings from the Bretton Woods institution since the start of the Covid-19 pandemic in early 2020.
In May of last year, the IMF disbursed Kenya shillings 79 billion through the rapid credit facility to help cope with the negative effects of the pandemic.
The National Treasury also expects some Sh 85 billion from the World Bank, another Bretton Woods institution.
Previously, the country had a precautionary credit agreement with the IMF, which ended after Kenya flouted some of the conditions, including not keeping its debt low.
While acknowledging that the economy will struggle to balance itself over the next fiscal year starting in July, the National Treasury increased its tax collection estimates in its final fiscal policy statement for 2021 compared to the draft estimate published earlier.
Most of the upward adjustments come from Ministerial Assistance Appropriations (AIA) or fees and fines charged by Crown corporations.