IMF Executive Board Completes the First Reviews of the Extended Arrangement under the EFF and ECF Arrangements for Kenya

IMF News, June 23, 2021

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Canonical URL: IMF Executive Board Completes the First Reviews of the Extended Arrangement under the EFF and ECF Arrangements for Kenya

The Executive Board completed the first reviews of the 38-month Extended Arrangement under the Extended Fund Facility (EFF) and 38-month arrangement under the Extended Credit Facility (ECF).
The Board’s decision allows for an aggregate immediate disbursement of US$ 407 million (about SDR 285 million).
This disbursement brings Kenya’s total disbursements for budget support under the arrangements to about US$ 714.5 million.
At program approval on April 2, Kenya’s EFF and ECF arrangements amounted to SDR 1,655 billion (305 percent of quota) or about US$ 2.34 billion.

Program aims:
- Address debt vulnerabilities.
- Support the response to the COVID-19 crisis.
- Enhance governance.
Multi-year fiscal consolidation centered on raising tax revenues and tightly controlling spending, while safeguarding resources to protect vulnerable groups.
The draft FY21/22 budget delivers a 1.6 percentage points of GDP reduction in the primary balance.

Kenya is staging an economic recovery despite a recent third wave of COVID-19 infections.
Growth projection: Growth is now estimated to pick up to 6.3 percent in 2021.
Continued uncertainty and pandemic-related pressures will persist until vaccinations become widely available.

Notable advances on structural reform and anti-corruption agendas.
Fiscal governance and transparency are being bolstered by the recent publication of comprehensive audits of COVID-19 related expenditures.
Authorities conducted an in-depth evaluation of the financial health of major state-owned enterprises (SOEs) facing the largest risks as part of a strategy to address SOE sector challenges and put firms on a financially viable footing.
Authorities plan to further enhance their monetary policy framework and continue supporting financial stability.
Forthcoming disclosure of beneficial ownership information of companies awarded procurement contracts is expected to strengthen fiscal transparency and accountability.
Emphasis on effective follow-up by appropriate institutions on audit findings.

The Central Bank of Kenya (CBK) has provided critical support during a very uncertain period.
Monetary policy stance recommendation: should remain accommodative as long as inflation and inflation expectations remain well-anchored within the target band.
Maintaining close supervision of credit risks and provisioning should continue to be a priority.

Program subject to notable risks, including:
- Uncertainty about the path of the pandemic.
- Potential pressures from the upcoming political calendar.
Kenya’s medium-term prospects described as positive.
IMF assessment: Kenya’s strong commitment to its economic program supported by the IMF has catalyzed financing on favorable terms.

Output
- Real GDP growth (%): 2019: 5.4; Est. 2020: -0.1; 2021 Proj.: 6.3; 2022: 6.4; 2023: 6.1
Prices
- Inflation - average (%): 2019: 5.2; Est. 2020: 5.3; 2021 Proj.: 5.5; 2022: 5.0
Central Government Finances (fiscal year)1
- Revenue (% GDP): 2019: 18.0; Est. 2020: 17.2; 2021 Proj.: 17.1; 2022: 17.0; 2023: 17.7
- Expenditure (% GDP): 2019: 25.7; Est. 2020: 25.0; 2021 Proj.: 24.6; 2022: 23.5
- Primary balance (% GDP): 2019: -3.7; Est. 2020: -3.5; 2021 Proj.: -4.6; 2022: -3.0; 2023: -1.1
- Fiscal balance (% GDP): 2019: -7.7; Est. 2020: -7.8; 2021 Proj.: -8.6; 2022: -7.5; 2023: -5.8
- Public debt (% GDP): 2019: 62.0; Est. 2020: 65.8; 2021 Proj.: 70.6; 2022: 73.0; 2023: 73.1
Money and Credit
- Broad money (% change): 2019: 5.6; Est. 2020: 13.2; 2021 Proj.: 8.5; 2022: 11.1; 2023: 11.4
- Credit to private sector (% change): 2019: 7.1; Est. 2020: 8.4; 2021 Proj.: 9.4; 2022: 9.6
- Policy rate, end of period (%): 2019: 7.0; Est. 2020: …
Balance of Payments
- Current account (% GDP): 2019: -5.3; Est. 2020: -5.5
- Reserves (in months of imports): 2019: 4.7; Est. 2020: 4.8; 2021 Proj.: 4.4; 2022: 4.2
- External debt (% GDP): 2019: 31.5; Est. 2020: 35.6; 2021 Proj.: 38.5; 2022: 38.4; 2023: 37.2
Exchange Rate
- REER (% change): 2019: -1.5

Press Release No. 21/195 — June 23, 2021. IMF Communications Department.