Kenya and the International Monetary Fund (IMF) have finalized a crucial agreement on a comprehensive set of policies and reforms. This agreement, reached following extensive discussions led by Ms. Haimanot Teferra and her IMF team, aims to complete the seventh reviews of Kenya’s Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements, along with the second review under the Resilience and Sustainability Facility (RSF) arrangement.
The agreement underscores key policy actions focused on safeguarding debt sustainability and addressing fiscal slippage observed in the previous fiscal year. It also outlines measures to bolster exports, enhance fiscal revenues, and fortify the economy against external shocks.
Pending approval by the IMF’s Executive Board, the agreement will adjust Kenya’s access to IMF resources, with a proposed recalibration towards more concessional financing under the ECF arrangement. This recalibration reflects Kenya’s recent bond market access and subsequent alleviation of exceptional balance of payment needs.
Ms. Teferra emphasized the importance of the policy package, stating, “The agreement seeks to preserve debt sustainability and price stability, manage fiscal risks, address financial sector vulnerabilities, and AML/CFT deficiencies while continuing to advance structural reforms to support inclusive and resilient growth.”
Despite positive economic growth in 2023, recent floods have highlighted the urgent need for comprehensive disaster risk management. Challenges persist, including a significant shortfall in tax revenue collection and persistent core inflation.
To address these challenges, the Kenyan authorities are implementing decisive fiscal measures, including broadening the tax base and enhancing expenditure efficiency. Additionally, efforts are underway to strengthen financial sector regulation and supervision, reduce financial sector risks, and combat financial crimes through enhanced AML/CFT measures.
The agreement also underscores progress on the climate agenda under the RSF, aiming to attract climate finance and scale up access to global climate funds.
In conclusion, the IMF staff expressed gratitude to the Kenyan authorities for their cooperation and reiterated the IMF’s support for Kenya’s economic reform agenda.
This agreement represents a significant step forward in Kenya’s ongoing efforts to maintain macroeconomic stability and foster inclusive growth.
photo source: Google
By: Montel Kamau
Serrari Financial Analyst
11th June, 2024
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