The International Monetary Fund (IMF) is angling to keep Kenya in its fold with just over four months to the lapse of its multi-year programme, which began in April 2021.
The fund is expected to conduct its final review of the programme in April and make its final disbursement estimated at Sh109.9 billion ($850 million), soon afterwards.
The Washington-based multilateral lender is keen to maintain its relationship with Kenya, as signalled by recent events.
IMF’s second deputy managing director Nigel Clarke, for instance, chose Kenya as his first port of call after his appointment on October 31.
Mr Clarke, during his visit underlined the importance of Kenya to the fund even as he remained non-committal on the lender’s plans beyond the current programme’s sunset date.
“The Kenya programme is extremely important for the IMF and one of the largest anywhere in the world. As a new deputy managing director, you are going to go to areas that are significant to the fund and hence my trip here,” he said on December 10, 2024.
Earlier, the IMF, which has been a key source of external financing for Kenya in recent years, released disbursements from the seventh and eighth reviews of the extended credit facility and the extended fund facility (ECF/EFF), wiring Sh78.3 billion ($606.1 million) to Nairobi.
This included funding from a review of resilience and sustainability fund (RSF)- a sustainability-linked programme reached in July 2023.
The combined reviews helped allay fears of the IMF pulling the plug on its programme with Kenya following the defeat of the Finance Bill, 2024 in June, which sunk a significant hole in the fiscal budget.
The IMF waived the non-observance of revenue raising conditions attached to its loans to Kenya during the joint reviews.
The waiver allowed Kenya to continue to access IMF resources despite the country's failure to meet the targets set under the programme.
The IMF will have approved Sh536.5 billion ($4.15 billion) in financing for Kenya by the time the ECF/EFF/RSF programmes expire in mid-2025, with cumulative disbursements of Sh426.6 billion ($3.3 billion) as of November 2024.
Kenya and the IMF have both expressed a desire to remain engaged, even as the former looks elsewhere to plug its external funding requirements, including a proposed Sh193.9 billion ($1.5 billion) commercial loan from the United Arab Emirates (UAE).
The IMF has blown hot and cold on its view of the proposed facility, first expressing its reservations before stating it does not comment on specific discussions between member countries and bilateral creditors.
For his part, National Treasury Cabinet Secretary John Mbadi has said Kenya will continue to engage with the IMF if the window remains open.
“I don’t think we can sever our links with the IMF if they are still giving us concessional loans to support our budget, we will still work with them,” he said previously.
Precautionary deal?
Kenya and the IMF will have to work on a programme outside the current ECF/EFF framework, as Nairobi will have already exhausted its respective share of the fund's resources when the current programme lapses.
The potential successor is likely to be a standby arrangement- an insurance-like facility that ensures the country can readily tap resources on a need basis without a full programme in place.
“The ECF/EFF programmes cannot be extended because they have been extended to maximum feasibility. Kenyan authorities have indicated that they would want to continue engaging the fund. In what form? The decision will have to come later as we assess the situation, whether we go with new funding or a precautionary arrangement, the country cannot have a present balance of payment needs and would have to mobilise resources from others to settle the need,” said IMF’s Mission Chief to Kenya Haimanot Teferra in a previous interview.
Kenya had a standby arrangement and standby credit facility that totalled Sh193.9 billion ($1.5 billion) until March 2018, prior to the current multi-year ECF/EFF programme.
The standby deals were in place to help Kenya navigate unforeseen external shocks, although both windows remained untapped.
Former Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge had likened the standby facilities to an insurance policy against a fire hazard, saying it assured of comfort and peace of mind whether the peril occurred or not.
