IMF to meet on Monday for Sh57bn Kenya loan approval

President William Ruto meets with IMF Managing Director Kristalina Georgieva

President William Ruto meets with IMF Managing Director Kristalina Georgieva on the sidelines of COP27 in Sharma El-Sheikh, Egypt. The IMF Executive Board will meet on Monday next week to approve Kenya’s Sh57.8 billion loan request

Photo credit: PCS

The International Monetary Fund (IMF) Executive Board will sit on Monday next week to consider the approval of a Sh57.8 billion ($410 million) loan to Kenya.

This marks the fifth review of Kenya’s ongoing loan programme with the IMF, which was extended by 10 months, from the initial period of 38 months, to April 2025 .

Successful consideration of the fifth review by the fund will unlock Kenya’s access to the $410 million, its sixth draw down from the credit line provided under the current programme.

“Fifth reviews under the Extended Fund Facility and Extended Credit Facility arrangements and request for a 20-month arrangement under the Resilience and Sustainability Facility. Requests for extension, re-phasing and augmentation of access, modification of a performance criterion, waiver of applicability for performance criteria and waiver of non-observance for a performance criterion, and monetary policy consultation clause”, the fund says in its board meetings calendar.

The IMF says the Executive Board meeting will focus on, among other things, Kenya’s request for a new 20-month loan facility under its Resilience and Sustainability Facility, translating to about Sh76.8 billion.

The amount will be Kenya’s second largest draw down from the ongoing IMF programme, with the largest having been the December 2022 Sh63.1 billion ($447.4 million) that followed conclusion of the fourth review.

“Upon completion of the fifth reviews by the IMF Executive Board, Kenya would have immediate access to SDR306.7 million (Sh57.8 billion), including from the augmentation of access under the Extended Credit Facility/Extended Fund Facility.

This would bring total IMF financial support disbursed under the Extended Fund Facility and Extended Credit Facility arrangements to SDR1,509 million (about Sh291.3 billion)”, the IMF stated in its May 23 statement upon conclusion of the staff level agreements.

The July 17 meeting comes at a time when the IMF Nairobi office is undergoing changes, with Haimanot Teferra having taken over as Mission Chief from Mary Goodman earlier in the year, while Tobias Rasmussen is due to exit as the Resident Representative this month. Mr Rasmussen has served in the position since August 2019.

The meeting comes days after the country secured a $500 million (Sh70.55 billion) syndicated loan arranged by a consortium of five international lenders. The loan is expected to fund ongoing development projects approved in the just-ended financial year.

The National Treasury had been seeking the facility since March when it mandated CitiGroup of the US, Standard Chartered Bank of the UK and South Africa’s Standard Bank and Rand Merchant Bank to arrange a $600 million facility.

In a statement issued last week, the lenders said the facility—as previously disclosed—is in two tranches of three and five years, but did not specify the respective amounts allocated to each tranche.

“The proceeds from the facility will be used by the National Treasury to finance development projects as per the development budget approved by the Kenyan Parliament for the Fiscal Year 2022/2023,” the lenders said.

The World Bank in May also approved a $1 billion (Sh141 billion) budget support loan for Kenya under the Fiscal Sustainability and Inclusive Green Growth Development Programme Operation.

The disbursement followed a request by Kenya to the World Bank to raise the amount by 33 per cent due to the tightened global financing conditions, which have seen it shelve a planned Eurobond issuance that had been slated for the last financial year.

The new loans add pressure to Kenya’s debt days after Parliament approved the conversion of Kenya’s debt ceiling from Sh10 trillion to a debt anchor as a percentage of the Gross Domestic Product. The move is in line with the push by the IMF to make the country’s debt more sustainable.

During the current financial year, the government projects debt servicing costs to rise by 30 per cent to Sh1.8 trillion from Sh1.38 trillion in the last financial year.