News Brief: IMF Augments Kenya Access to Resources Under PRGF Program
October 18, 2000
To assist the Kenyan authorities in their efforts to address the impact of the current severe drought affecting the country, the Executive Board of the International Monetary Fund (IMF) today modified the first-year program for Kenya under the Poverty Reduction and Growth Facility (PRGF)1. The modification allows Kenya to borrow an additional SDR 40 million (about US$ 52 million), with an immediate disbursement of SDR 20 million (about US$ 26 million) from the IMF, bringing total disbursements so far under the program to SDR 33.6 million (about US$ 43 million).
The three-year arrangement under the PRGF was approved on July 28, 2000 for a total amount equivalent to SDR 150 million (about $193 million.) (See Press Release 00/45.)
After the Executive Board’s discussion on Kenya, Stanley Fischer, First Deputy Managing Director, made the following statement:
“The impact of the drought in Kenya has turned out to be much more severe than was anticipated at the time of the approval of the PRGF in July this year. It is among the most severe droughts that the country has faced, and its adverse effects are being felt through a slowdown in economic growth, higher inflation, and an increase in unemployment. In addition to the adverse implications for the macroeconomic program for 2000/01, the drought has raised the possibility of famine and other human tragedies.
“Kenya needs additional support from the international community for drought relief. We welcome the government’s decision to request the World Food Program to coordinate and implement the food relief effort, in collaboration with NGOs and other UN agencies. As part of this international effort, the IMF Executive Board has agreed to modify the program targets to reflect the need to allow for much higher expenditure and to accommodate lower revenue, and also to increase Kenya’s access under the present PRGF arrangement by a further SDR 40 million (about US$52 million), to bring total access to SDR 190 million (about US$ 247 million). Directors also granted a waiver for the nonobservance of the performance criterion on external arrears.
“Structural reforms in Kenya are broadly on track. It remains crucial, however, to implement in full all the elements of the PRGF-supported program. Improving governance remains an essential element for the success of the poverty reduction strategy. Early passage of effective code of ethics and anti-corruption and economic crimes legislation will be key measures in this regard,” Mr. Fischer said.
1 On November 22, 1999, the IMF’s concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It was intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and developments partners, and articulated in a poverty reduction strategy paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. In the Kenya case, an interim PRSP --which provides a guideline to the preparation of a full PRSP-- were prepared and presented to the World Bank and the IMF Executive Boards in July. PRGF loans carry an annual interest rate of 0.5%, and are repayable over 10 years with a 5 1/2 year grace period on principal payments.