IMF pulls rug from under the Kenyan Shilling

By Nita Karume—

The International Monetary Fund (IMF) has stopped Nairobi’s access to a Sh152 billion ($1.5 billion) precautionary facility. This, in turn, has left The Kenyan shilling exposed to the turbulence of foreign exchange markets.

Kenya was yet to take advantage of the two-year facility, which has enabled the country to weather economic blows as at March last year. The facility has since helped stabilize the shilling against the dollar.
On the other hand, neither the CBK nor the National Treasury made public the IMF’s withdrawal of access to the facility seven months ago. Furthermore, the two institutions failed to give a tangible response with regards to the same at the time they had gone to press.

In essence, the withdrawal of the facility leaves foreign reserves as the only cushion now available to the CBK to protect the shilling in the currency market. Furthermore, the IMF’s disclosure comes at a time when senior Treasury officials, are on the scheduled roadshow in the US and Europe. This is ahead of the planned issuance of a new Eurobond in the current financial year.
The IMF is however expected to face intense questioning over its decision to wait for seven months before making public its decision to block access to the facility.

According to the IMF representative in Kenya Jan Mikkelsen, the facility has not been discontinued. However, Nairobi will not be able to access the same after failing to complete a periodic review. He went on to add that the review would have addressed the government’s failure to meet the budget deficit reduction threshold attached to the loan agreement.
Mr. Mikkelsen also noted that the lengthy election period of last year made it difficult to have a review and complete that in the period that followed.

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