Press Release: IMF Executive Board Approves Three-Year, US$508.7 Million Arrangement Under Extended Credit Facility for Kenya
IMF News, January 31, 2011
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- Published: January 31, 2011
Executive Board approval and disbursement
- The Executive Board approved a three-year arrangement under the Extended Credit Facility for Kenya in an amount equivalent to SDR 325.68 million (about US$508.7 million).
- The approval immediately enables an initial disbursement of an amount equivalent to SDR 65.1 million (about US$101.7 million).
Program objectives and design
- Primary aims:
- Protect Kenya’s external position while allowing a gradual fiscal adjustment.
- Rebuild Kenya’s international reserves and provide a reserve cushion to deal with adverse shocks.
- Address balance-of-payments financing needs.
- Program targets and policy orientation:
- Raise real GDP to close to 7 percent.
- Bring the public debt-to-GDP ratio to below 45 percent over the medium term.
- Keep inflation at 5 percent while maintaining a floating exchange rate regime.
- Support scaling up investment in key priority social and economic sectors and critical infrastructure, in particular geothermal power generation.
- Implement structural reforms in public financial management, public services, business regulation, and the financial sector.
Fiscal strategy and structural measures
- Fiscal approach:
- Gradual reduction in the central government primary balance through tax reform and strict control of current spending.
- Tax measures include reform of the value-added and income taxes to improve coverage and compliance.
- Fiscal consolidation to reverse the rise in public debt resulting from prior fiscal expansion while accommodating costs of implementing the new constitution and high-priority public investments.
- Governance and public expenditure management:
- Successful implementation of constitutional provisions to strengthen the judiciary and overhaul the public expenditure management framework.
- Program seeks to create fiscal space necessary to implement the constitution, raise infrastructure investment, and protect spending aimed at poverty reduction.
Statement by Mr. John Lipsky (First Deputy Managing Director and Acting Chair)
- Kenya’s economy is bouncing back from the slowdown that accompanied the global financial crisis.
- Fiscal stimulus boosted the recovery, especially in construction; benign weather conditions supported a rebound in agriculture.
- The ratification of the new constitution by the August 2010 referendum has spurred confidence and provides an opportunity to address long-standing social and institutional problems and implement additional reforms, including on fiscal decentralization, the public expenditure framework, and land ownership.
- The arrangement provides a reserves cushion to reduce vulnerabilities to external shocks, including a projected deterioration of the terms of trade in the next two years, and will help maintain fiscal discipline as fiscal decentralization gets underway while keeping inflation low in the context of Kenya’s floating exchange rate regime.
Recent economic developments (ANNEX)
- Recovery drivers and outlook:
- Kenyan economy recovering from two consecutive droughts, social strife, and the global economic downturn.
- Growth estimated at above 5 percent in 2010, up from 2.6 percent in 2009, driven by a rebound in agriculture and a boost in construction activity aided by government infrastructure efforts.
- Medium-term growth objective:
- Poverty Reduction Strategy Paper aims for real GDP growth of 10 percent in the medium term to enable increased resources to sectors that benefit the poor, including education and health.
Program summary (high-level)
- Aim: boost international reserves while adopting a gradual fiscal adjustment over a three-year horizon.
- Emphasis: scale up investment in priority sectors and critical infrastructures; implement structural reforms in public financial management, public services, business regulation, and the financial sector.
Kenya: Selected Economic Indicators, 2008/09–2013/2014 (selected figures preserved exactly)
- Fiscal year: from July 1st through June 30th.
- Nominal GDP (market prices, in billions of Kenya shillings):
- 2008/09: 2,176
- 2009/10: 2,410
- 2010/11: 2,713
- 2011/12: 3,075
- 2012/13: 3,464
- 2013/14: 3,880
- Real GDP growth (market prices):
- 2008/09: 2.1
- 2009/10: 3.8
- 2010/11: 5.4
- 2011/12: 6.1
- 2012/13: 6.7
- 2013/14: 6.8
- GDP deflator (average) 2/:
- 2008/09: 9.3
- 2009/10: 6.9
- 2010/11: 5.6
- 2011/12: 4.9
- Consumer price index (annual average) 2/:
- 2008/09: 15.0
- 2009/10: 5.3
- 2010/11: 3.4
- 2011/12: 5.0
- Consumer price index (end of period) 2/:
- 2008/09: 8.6
- 2009/10: 3.5
- 2010/11: 4.0
- Import volume growth, goods, and services:
- 2008/09: 13.6
- 2009/10: 8.7
- 2010/11: 5.5
- 2011/12: 5.8
- 2012/13: 6.6
- 2013/14: 7.2
- Import value growth, goods, and services:
- 2008/09: 9.5
- 2009/10: 2.9
- 2010/11: 12.5
- 2011/12: 9.1
- 2012/13: 12.0
- 2013/14: 7.8
- Export volume growth, goods, and services:
- 2008/09: -1.5
- 2009/10: 5.9
- 2010/11: 11.0
- 2011/12: 10.5
- 2012/13: 9.7
- 2013/14: (not specified)
- Export value growth, goods, and services:
- 2008/09: 0.5
- 2009/10: 12.8
- 2010/11: 8.8
- 2011/12: 15.5
- 2012/13: 8.3
- Terms of trade, goods, and services (Base year 2000):
- 2008/09: 6.5
- 2009/10: 12.1
- 2010/11: -7.3
- 2011/12: -7.4
- 2012/13: 0.2
- 2013/14: -2.7
- Ksh per US$ exchange rate (end of period) 3/:
- 2008/09: 77.2
- 2009/10: 81.9
- 2010/11: 81.0
- Nominal effective exchange rate (- depreciation; end of period):
- 2008/09: -10.4
- 2009/10: -1.2
- 2010/11: …
- Real effective exchange rate (- depreciation; end of period):
- 2008/09: -4.3
- 2009/10: -2.4
- M3 (broad money and foreign currency deposits, end period):
- 2008/09: 13.0
- 2009/10: 26.2
- 2010/11: 19.2
- 2011/12: 16.6
- 2012/13: 14.1
- 2013/14: 14.7
- Investment and saving:
- Investment:
- 2008/09: 19.9
- 2009/10: 20.5
- 2010/11: 23.1
- 2011/12: 24.5
- 2012/13: 25.2
- Central government (investment):
- 2008/09: 7.5
- 2009/10: 8.9
- 2010/11: 10.3
- 2011/12: 10.6
- 2012/13: 11.1
- 2013/14: 10.9
- Other:
- 2008/09: 12.4
- 2009/10: 11.6
- 2010/11: 13.9
- 2011/12: 14.3
- Gross national saving:
- 2008/09: 11.9
- 2009/10: 15.1
- 2010/11: 15.8
- 2011/12: 17.0
- 2012/13: 18.7
- 2013/14: 20.2
- Central government 4/:
- 2008/09: 2.2
- 2009/10: 1.6
- 2010/11: 2.7
- 2011/12: 3.7
- 2012/13: 5.1
- 2013/14: 13.1
- Central government budget 5/:
- Total revenue:
- 2008/09: 22.4
- 2009/10: 22.7
- 2010/11: 25.3
- 2011/12: 25.6
- Total expenditure and net lending:
- 2008/09: 27.8
- 2009/10: 30.1
- 2010/11: 32.9
- 2011/12: 31.8
- 2012/13: 31.2
- 2013/14: 30.8
- Overall balance (commitment basis) excluding grants:
- 2008/09: -5.4
- 2009/10: -7.7
- 2010/11: -6.6
- 2011/12: -5.9
- 2012/13: -5.2
- Overall balance (commitment basis) including grants:
- 2008/09: -4.5
- 2009/10: -6.5
- 2010/11: -5.3
- 2011/12: -4.6
- 2012/13: -3.9
- Primary budget balance:
- 2008/09: -3.8
- 2009/10: -1.9
- Net domestic borrowing:
- 2008/09: 3.1
- 2009/10: 4.6
- 2010/11: 3.2
- 2011/12: 1.3
- 2012/13: 1.2
- Balance of payments:
- Exports value, goods, and services:
- 2008/09: 26.6
- 2009/10: 27.3
- 2010/11: 27.9
- 2011/12: 26.0
- 2012/13: 25.8
- Imports value, goods, and services:
- 2008/09: 42.0
- 2009/10: 39.4
- 2010/11: 41.6
- 2011/12: 40.0
- 2012/13: 39.8
- 2013/14: 38.2
- Current external balance, including official transfers:
- 2008/09: -8.0
- 2009/10: -7.5
- 2010/11: -5.0
- Current external balance, excluding official transfers:
- 2008/09: -7.9
- 2009/10: -7.2
- 2010/11: -6.4
- Gross international reserve coverage:
- In billions of U.S. dollars (end of period):
- 2008/09: 4.2
- 2009/10: 7.4
- In months of next year imports (end of period):
- 2008/09: 3.3
- 2009/10: 4.4
- Public debt 6/:
- Total public debt, net (percent of GDP):
- 2008/09: 41.7
- 2009/10: 45.7
- 2010/11: 47.1
- 2011/12: 46.9
- 2012/13: 45.1
- 2013/14: 43.6
- Of which: external debt:
- 2008/09: 23.3
- 2009/10: 23.5
- 2010/11: 22.8
- 2011/12: 22.2
- 2012/13: 21.9
- 2013/14: 21.7
- Domestic debt, net of deposits:
- 2008/09: 18.5
- 2009/10: 24.3
- 2010/11: 24.6
- 2011/12: 23.2
Press Release No. 11/22 — January 31, 2011. IMF Executive Board approval of a three-year ECF arrangement for Kenya equivalent to SDR 325.68 million (about US$508.7 million).