The International Monetary Fund (IMF) and Kenya reached a staff-level agreement, opening the door for the payment of roughly USD 976 million.
The fund said in a statement that it would have instant access to USD 120 million if its Executive Board approves a second review of Kenya’s Resilience and Sustainability Facility.
The lender also recommended that the East African country amend its 2024–2025 budget to include more measures aimed at raising revenue, given that the country’s domestic borrowing needs were anticipated to remain high due to a decline in the primary fiscal balance during the previous fiscal year and a shortfall in tax collection.
Kenya has struggled with liquidity since 2022, but in February 2024 it was able to partially repurchase another Eurobond that is maturing in June by selling a USD 1.05 billion Eurobond from international markets, albeit at a steep price.
The announcement eased investor fears about a possible default, won back the trust of overseas investors in the economy, and strengthened the shilling’s value relative to the dollar.
The fund suggested that making fiscal changes for 2024–2025 could help the situation.
“Authorities have taken decisive steps towards fiscal consolidation by introducing several measures in the context of the draft 2024/25 Budget and the 2024 Finance Bill,” it added.
The Finance Minister is scheduled to deliver the 2024–25 (July–June) budgets to the legislature. The 4 trillion shillings (USD 31 billion) in total spending for the year was approved by
Parliament, which is an increase from the 3.75 trillion shillings the minister had presented in June 2023 for the 2023–2024 year. A later adjustment brought that budget down to 3.85 trillion shillings.
Alongside the 2024–25 budget, there will be a separate Finance Bill 2024 law that outlines revenue-raising proposals. Some critics claim that some of these proposals could bankrupt industries like financial services, transportation, manufacturing, and retail.
The USD 3.6 billion IMF agreement that Kenya is currently party to, was reached in April 2021. As part of the program, this review is the seventh one.