Tuesday, March 15, 2016 11:22 am
The International Monetary Fund (IMF) has approved two-year standby facilities for Kenya worth about $1.5 billion, the IMF said in a statement issued late on Monday.
The IMF said the facilities could be drawn on if the East African nation faces unforeseen shocks.
“The Kenyan authorities have indicated that they will continue to treat both arrangements as precautionary,” the IMF said after the completion of discussions with Kenya on replacing existing facilities.
The funds comprise a standby arrangement worth about $990 million and a standby credit facility worth about $495 million.
The IMF said Kenya only intended to draw on them if it faced “exogenous shocks” that led to a balance of payments need.
The Central Bank of Kenya calmed volatilities in the markets in 2015 after hiking its benchmark lending rate by 3 percentage points to 11.50 per cent.
It has also increased foreign reserves without turning to the IMF standby loan.
So far this year, the shilling has been firm, appreciating by about 0.6 per cent against the U.S. dollar.
On March 10, reserves stood at $7.33 billion, the equivalent of 4.7 months import cover, up from $7.1 billion at the end of 2015.
“Kenya’s recent growth performance remains robust and the outlook is positive,” IMF Deputy Managing Director.
“Despite positive policy steps undertaken under the current Fund-supported programme, the economy remains vulnerable to shocks, reflecting less favorable global financial market conditions, as well as continued security threats and potential extreme weather events,”Min Zhu said.
At the end of last year, Kenya has estimated growth for 2015 at between 5.8 to 6.0 percent, lower than originally expected but still higher than the 2014 figure of 5.3 per cent.
The IMF said cutting the budget deficit was a key step to contain risks, while still supporting major infrastructure projects and providing essential health and education needs.
Kenya’s budget deficit for the financial year 2015/16 ending on June 30 is forecast at 8.1 per cent of gross domestic product, falling to 6.9 per cent in 2016/17, draft Finance Ministry figures have shown.
The East African nation has ramped up spending in recent years to build a modern railway, roads and electricity plants, driving up the deficit and unnerving investors.