Press Release: IMF Executive Board Completes Third and Final Review Under the Poverty Reduction and Growth Facility for Kenya and Approves US$59.3 Million Disbursement
November 16, 2007Press Release No. 07/265
The Executive Board of the International Monetary Fund (IMF) today completed the third and final review of Kenya's economic performance under a three-year Poverty Reduction and Growth Facility (PRGF) arrangement. The completion of the review enables the release of an amount equivalent to SDR 37.5 million (about US$59.3 million), bringing total disbursements under the arrangement to SDR 150 million (about US$237.4 million).
In completing the review, the Board approved waivers for the nonobservance of four performance criteria and one prior action. These included one quantitative performance criterion on the reserve money of the Central Bank of Kenya (CBK), one quantitative performance criterion pertaining to the non-accumulation of new external payment arrears, one structural performance criterion on the submission to Cabinet for approval of a strategy to initiate the sale of the government and the National Social security Fund (NSSF) shares in the National Bank of Kenya, and one structural performance criterion on making the Public Procurement Oversight Authority fully operational under the Public Procurement and Disposal Act. The prior action related to dissemination of information on procurement contracts.
The three-year PRGF arrangement for Kenya was originally approved on November 21, 2003 (see Press Release No. 03/201), in an amount equivalent to SDR 175 million (about US$276.9 million). On December 20, 2004, the Executive Board approved an augmentation of access under the PRGF arrangement of SDR 50 million (about US$79.1 million) (see Press Release No. 04/270). The arrangement was subsequently extended to April 30, 2007 to allow time to complete the second review (see Press Release No. 07/37). An additional extension of the arrangement to November 20, 2007 was approved on April 11, 2007 (See Press Release 07/66), along with a reduction in access by SDR 75 million (about US$118.7 million), consistent with an improvement in Kenya's external position. On that occasion, remaining disbursements under the arrangement were rephased, bringing the total amount available under the arrangement to SDR 150 million (about US$237 million).
Following the Executive Board discussion on Kenya's economic performance under the PRGF, Mr. John Lipsky, First Deputy Managing Director and Acting Chair, stated:
"The Kenyan economy is growing strongly against the background of sound macroeconomic management and progress in structural reforms. At the same time, the external position has strengthened.
"The sharp increase in spending envisaged in the 2007/08 budget entails some risks. However, the authorities are taking steps to address these risks, including by backloading development spending in line with available financing and fully implementing the budget only if inflation remains low and project quality is maintained.
"The planned sovereign bond would have limited effect on the net present value of Kenya's debt. The authorities should consider allocating a higher share of the planned proceeds to debt reduction, and should draw upon the debt management expertise available in the Fund. The temporary accumulation of external payment arrears is regrettable.
"Monetary policy should remain focused on securing low inflation. To this end, it will be essential that the Central Bank of Kenya achieve its reserve money targets.
"Concerning governance, challenges remain despite some important progress. Efforts to fully implement the Governance Action Plan should continue, and more progress is needed in investigating and prosecuting high-profile corruption cases.
"Business regulation has been streamlined and public financial management has been strengthened, as evidenced by advances in implementing the Integrated Financial Management Information System and continuous progress in public enterprise reform. Looking forward, greater efforts are needed to improve the legal framework for public finance management and to accelerate financial sector reform."