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Kenya Utilizes IMF SDR Reserves to Address Economic Pressures

Kenya’s Treasury has disclosed the withdrawal of Sh105 billion from the International Monetary Fund (IMF)-backed dollar reserves, known as Special Drawing Rights (SDRs). This allocation constitutes 2.1 percent of Kenya’s domestic debt.

Prompted by increased IMF allocations in August 2021, Kenya’s decision to access SDRs underscores the necessity for additional liquidity to navigate ongoing economic uncertainties. Despite the country’s efforts to manage its debt burden, challenges persist, particularly in light of pandemic-induced shocks and adverse climatic conditions.

As of January 31, Kenya held Sh37.9 billion ($263.5 million) in SDR reserves, out of total allocations amounting to Sh84.2 billion ($584.5 million). The utilization of SDR resources supplements existing funding sources, including grants, loans, and domestic and international borrowings, reinforcing the country’s financial resilience amidst challenging market conditions.

However, details regarding the terms of IMF SDR allocations, including associated interest rates, remain undisclosed by the Central Bank of Kenya (CBK), prompting speculation about the cost implications for the exchequer.

In conclusion, Kenya’s strategic utilization of IMF SDR reserves underscores its commitment to addressing immediate economic pressures and fostering sustainable growth. By tapping into these reserves, the government aims to bolster its financial position and pave the way for a resilient economic recovery in the face of ongoing global uncertainties.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

February 26th, 2024

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