Kenya: Third Reviews Under the Extended Arrangement Under the Extended Fund Facility and Under the Arrangement Under the Extended Credit Facility, and Requests for Modification of Quantitative Performance Criteria, and Waiver of Applicability for Performance Criteria-Press Release; Staff Report; Staff Statement; and Statements by the Executive Director and by Staff Representative for Kenya

IMF Staff Country Reports, July 19, 2022

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Canonical URL: Kenya: Third Reviews Under the Extended Arrangement Under the Extended Fund Facility and Under the Arrangement Under the Extended Credit Facility, and Requests for Modification of Quantitative Performance Criteria, and Waiver of Applicability for Performance Criteria-Press Release; Staff Report; Staff Statement; and Statements by the Executive Director and by Staff Representative for Kenya

Highlights Kenya’s Third Reviews under the Extended Arrangement under the Extended Fund Facility and under the Arrangement under the Extended Credit Facility, Requests for Modification of Quantitative Performance Criteria, and Waiver of Applicability for Performance Criteria.
A strong recovery is underway.
Global shocks due to spillovers from the war in Ukraine are creating new spending needs and adding to inflation pressures through rising global fuel, fertilizer, and food prices.
Kenya’s program is delivering resilience by helping the country navigate these global shocks while still meeting the authorities’ targets and continuing to make progress in addressing debt vulnerabilities.
Strong fiscal performance is providing a welcome resilience.
Although the authorities are adjusting domestic fuel prices to international levels more gradually, program targets are still being met thanks to strong tax revenues.

Recovery status: "A strong recovery is underway."
External shock drivers: "spillovers from the war in Ukraine" increasing "global fuel, fertilizer, and food prices."
Inflationary pressures: rising global commodity prices are "adding to inflation pressures."

The program supports Kenya in navigating global shocks while "still meeting the authorities’ targets."
Fiscal performance: "Strong fiscal performance is providing a welcome resilience."
Fuel pricing policy: "the authorities are adjusting domestic fuel prices to international levels more gradually," with program targets nonetheless being met "thanks to strong tax revenues."
Debt vulnerabilities: the program is "continuing to make progress in addressing debt vulnerabilities."

Maintaining momentum in the authorities’ structural reform agenda is identified as "critical."
State-owned enterprise (SOE) oversight: build on "ongoing efforts to improve the oversight of state-owned enterprises."
Specific SOE priorities:
- "advance the restructuring of Kenya Airways"
- "restore the long-term viability of Kenya Power and Lighting Company"

Continue implementing the structural reform agenda to strengthen resilience to external shocks.
Advance SOE restructuring and governance reforms to address fiscal risks and long-term viability.
Maintain fiscal discipline supported by revenue performance to meet program targets despite external price shocks.
Implement gradual fuel price adjustments to align domestic prices with international levels while protecting fiscal and social objectives.

Source: IMF Staff Country Report; July 19, 2022.