The International Monetary Fund (IMF) has granted Kenya a significant financial boost to tackle its economic challenges and enhance its resilience to climate change.
With loans totaling approximately Sh59 billion under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) arrangements, as well as an additional Sh78 billion loan under the Resilience and Sustainability Facility (RSF), Kenya is poised to strengthen its economic foundations and mitigate the impact of environmental risks.
The EFF/ECF arrangements are designed to support Kenya’s comprehensive program aimed at addressing debt vulnerabilities, responding to the COVID-19 pandemic, and managing global economic shocks.
“The EFF/ECF arrangements aim to support Kenyaâs program to address debt vulnerabilities, the authoritiesâ response to the COVID-19 pandemic and global shocks, and to enhance governance and broader economic reforms while safeguarding resources to protect vulnerable groups and address developmental needs,” IMF said.
In addition to safeguarding resources for vulnerable groups and development needs, the IMF recognizes Kenya’s progress in implementing economic reforms despite challenges such as severe drought and an uncertain external environment.
The approval of the RSF loan signifies the international community’s recognition of Kenya’s ambitious efforts to build resilience to climate change. This financial support will enable Kenya to integrate climate-related considerations into its macro policies and frameworks.
By adopting green public financial management and climate-sensitive public investment management reforms, Kenya aims to promote sustainable practices and make strategic investments in climate change mitigation and adaptation measures.
Antoinette Sayeh, the Deputy Managing Director and Acting Chair at IMF, expressed her support for Kenya’s commitment to sustaining macroeconomic stability, promoting inclusive growth, and advancing ongoing reforms.
The recent approval of the Finance Act 2023 is seen as a significant milestone in turning around Kenya’s economic fortune. It will help reduce debt vulnerabilities while protecting social and development expenditures.
Despite these positive developments, challenges in resource mobilization and elevated uncertainty require proactive measures.
The IMF emphasizes the need for contingency plans that can be swiftly implemented to protect fiscal performance. Tighter financing conditions call for prudent debt policies and continued prioritization of concessional loans.
The IMF encourages the Central Bank of Kenya (CBK) to maintain a data-dependent policy stance to anchor inflation expectations.
âThe Central Bank of Kenyaâs (CBK) commitment to a data-dependent policy stance is essential to keep inflation expectations anchored. The CBK should also continue taking appropriate steps to strengthen its reserves position and deepen the FX market while allowing exchange rate flexibility as a shock absorber,” Sayeh said.
