Kenya: Seventh and Eighth Reviews Under the Extended Fund Facility and Extended Credit Facility Arrangements, Requests for Reduction of Access, Augmentation and Rephasing of Access Under the Arrangements, Modifications of Performance Criteria, Waiver of Nonobservance of Performance Criteria, and Review Under the Resilience and Sustainability Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Kenya
IMF Staff Country Reports, November 1, 2024
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- Kenya: Seventh and Eighth Reviews Under the Extended Fund Facility and Extended Credit Facility Arrangements, Requests for Reduction of Access, Augmentation and Rephasing of Access Under the Arrangements, Modifications of Performance Criteria, Waiver of Nonobservance of Performance Criteria, and Review Under the Resilience and Sustainability Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Kenya
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Bibliographic details
- Published: November 1, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400291067.002
Summary and key findings
- Resolution of the exceptional external financing pressure earlier this year has revived market confidence.
- Stabilization of the shilling has been aided and a faster buildup of foreign exchange reserves has been enabled.
- Large revenue shortfalls in FY2023/24 and pushback against revenue measures owing to governance concerns pose a challenge to ongoing fiscal consolidation efforts.
- The Kenyan authorities face a difficult balancing act of boosting domestic revenues to protect critical spending in priority areas while meeting heavy debt service obligations.
- Delivering on fiscal consolidation would call for improving governance and transparency to restore public trust in the effective use of public resources.
- Timely identification and deployment of fiscal contingency measures, as needed, maintaining prudent policies, recalibration of access, and a tailored capacity development strategy could somewhat help mitigate the elevated enterprise risks, including financial risks to the IMF.
- Success in climate finance mobilization efforts presents an upside to investments in climate resilience.
Fiscal and debt dynamics
- Large revenue shortfalls in FY2023/24 are a central impediment to fiscal consolidation.
- Heavy debt service obligations constrain fiscal space and increase the need for higher domestic revenues.
- Governance concerns that have led to pushback against revenue measures undermine efforts to secure public buy-in for reforms.
Policy recommendations and program adjustments
- Improve governance and transparency to restore public trust in the effective use of public resources.
- Identify and deploy fiscal contingency measures in a timely manner, as needed.
- Maintain prudent policies while recalibrating access under the arrangements.
- Implement a tailored capacity development strategy to help deliver on the reform agenda.
Risks and upside scenarios
- Elevated enterprise risks, including financial risks to the IMF, persist and could be somewhat mitigated by the policy measures outlined above.
- Successful climate finance mobilization represents an upside that could support investments in climate resilience.
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- 1kenea2024003-print-pdf