{
  "title": "IMF Executive Board Completes Fourth Reviews of EFF and ECF Arrangements for Kenya Providing a US$447.39 million Disbursement",
  "publication": "IMF News, December 19, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/12/19/pr22445-kenya-imf-exec-board-completes-4th-reviews-eff-ecf-arrangements-providing-usd-disbursement",
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  "summary": "IMF Executive Board Completes Fourth Reviews of EFF and ECF Arrangements for Kenya Providing a US$447.39 million Disbursement",
  "publishDate": "2022-12-19",
  "sections": [
    {
      "heading": "Key decision and financing",
      "content": "- The Executive Board completed the Fourth reviews of the 38-month arrangements under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF).\n- Immediate disbursement: SDR336.54 million (about US$447.39 million) usable for budget support.\n- Augmentation under the ECF: SDR162.34 million (30 percent of quota, about US$215.81 million).\n- Cumulative disbursements under the EFF/ECF arrangements reported as about US$1.655.59 million.\n- Total amount under the EFF/ECF arrangements after the augmentation: SDR 1.818 billion (335 percent of quota or about US$2.416 billion)."
    },
    {
      "heading": "Macroeconomic outlook and key risks",
      "content": "- Near-term environment:\n  - Global developments have contributed to rising inflation and slowing growth.\n  - Kenya’s economy is described as resilient amid a continuing severe drought in some regions.\n  - Kenya projected to grow 5.3 percent in 2022.\n  - Inflation moved above the Central Bank of Kenya’s (CBK) target band in June and is expected to peak in early 2023.\n  - Despite double-digit export growth, the current account is expected to widen on higher global oil prices in 2022.\n  - Downside risks predominate in the near term; medium-term outlook remains favorable although climate-related risks are elevated.\n- Monetary and external:\n  - The CBK raised policy rates by a cumulative 175 basis points in 2022.\n  - The Kenyan Shilling continued to depreciate against the U.S. dollar while the dollar strengthened globally.\n  - Liquidity has declined in the interbank forex market.\n  - A lower projected path of FX reserves reflects financing shortfalls last fiscal year and planned cuts in foreign-financed projects during FY2022/23.\n  - Reserves remain adequate at 3 months of imports, gradually increasing over the medium term."
    },
    {
      "heading": "Fiscal and debt developments",
      "content": "- Fiscal performance:\n  - With progress on fiscal consolidation, public debt has begun leveling off.\n  - Taxes performed strongly in FY2021/22, while spending was compressed on shortfalls in external commercial financing.\n  - Primary deficit overperformance: 1.7 percent of GDP (i.e., primary deficit was smaller by 1.7 percent of GDP than programmed).\n  - Obligations carried over from last fiscal year and an increase in unbudgeted spending in early FY2022/23 increased pressures on the budget.\n  - The new administration of President Ruto has reasserted Kenya’s commitment to fiscal consolidation, targeting a lower overall fiscal deficit than the original budget."
    },
    {
      "heading": "Structural reforms and governance",
      "content": "- Progress reported:\n  - Audits of COVID-19 vaccine spending completed and published.\n  - Begun publishing beneficial ownership information of successful bidders in new procurements.\n- Delays and vulnerabilities:\n  - Progress on addressing financial weaknesses in state-owned enterprises and a planned review of the fuel pricing mechanism were delayed during the political transition.\n  - AML/CFT legal framework needs strengthening and stepped-up efforts on compliance.\n  - Urgent need to address vulnerabilities at Kenya Airways and Kenya Power and Lighting Company.\n  - Need to strengthen the governance framework for state-owned corporations.\n  - Planned reviews of the fuel pricing mechanism and the audit of extrabudgetary spending are important.\n  - High vulnerability to climate change calls for multi-faceted policy action."
    },
    {
      "heading": "Policy recommendations and IMF assessment (excerpt from Ms. Antoinette Sayeh statement)",
      "content": "- Fiscal policy:\n  - Continued strong commitment to fiscal consolidation over the medium term to reduce debt vulnerabilities.\n  - Additional tax policy measures, anchored in a Medium-Term Revenue Strategy, to secure space for needed social and development spending.\n  - Improved spending efficiency, revenue administration, and public financial and debt management.\n- Monetary and external policies:\n  - The CBK’s monetary policy stance is welcome; further tightening would limit second-round effects and keep inflationary expectations well-anchored while supporting external adjustment.\n  - The exchange rate should function as a shock absorber, supported by a well-functioning interbank FX market; forex interventions (sales) should be limited to addressing excessive volatility.\n  - Continued monitoring of the banking system is important.\n- Structural governance and transparency:\n  - Continue progress on structural reforms and transparency initiatives (e.g., publishing beneficial ownership information for successful bidders).\n  - Strengthen AML/CFT legal framework and compliance.\n  - Address SOE vulnerabilities and strengthen governance for state-owned corporations.\n  - Complete planned reviews of the fuel pricing mechanism and the audit of extrabudgetary spending.\n- Climate and inclusion:\n  - Multi-faceted policy action to address high vulnerability to climate change.\n  - Continue initiatives to promote inclusive growth."
    },
    {
      "heading": "Selected economic indicators (2021—2024, as reported)",
      "content": "- Output\n  - Real GDP growth (%): 2021 Act. 7.5; 2022 Proj. 5.3; 2023 5.1; 2024 5.5\n- Prices\n  - Inflation - average (%): 2021 Act. 6.1; 2022 Proj. 7.7; 2023 7.8; 2024 5.7\n- Central government finances (fiscal year)1\n  - Revenue (% GDP): 2021 Act. 16.0; 2022 Proj. 17.3; 2023 17.5; 2024 17.8\n  - Expenditure (% GDP): 2021 Act. 24.2; 2022 Proj. 23.5; 2023 23.3; 2024 22.1\n  - Fiscal balance (% GDP): 2021 Act. –8.2; 2022 Proj. –6.2; 2023 –5.8; 2024 –4.4\n  - Public debt (% GDP): 2021 Act. 67.7; 2022 Proj. 66.6; 2023 67.6; 2024 66.2\n  - External debt (% GDP): 2021 Act. 35.2; 2022 Proj. 33.3; 2023 34.1; 2024 33.9\n- Money and Credit\n  - Broad money (% change): 2021 Act. 9.0; 2022 Proj. 7.4; 2023 9.4; 2024 (not listed)\n  - Credit to private sector (% change): 2021 Act. 8.6; 2022 Proj. 12.0; 2023 12.3; 2024 13.3\n  - Policy rate, end of period (%): 2021 Act. 7.0; 2022 Proj. …\n- Balance of payments\n  - Current account (% GDP): 2021 Act. –5.2; 2022 Proj. –5.7; 2023 –5.4; 2024 –5.3\n  - Reserves (in months of imports): 2021 Act. 4.5; 2022 Proj. 3.7; 2023 3.0; 2024 3.2\n- Exchange rate\n  - REER (% change): 2021 Act. –2.6\n\nIMF Communications Department press release, December 19, 2022.\n\n---\n\n\n References\n\n- https://www.imf.org/en/about/senior-officials/bios/antoinette-monsio-sayeh\n- Kenya and the IMF\n- Press Releases\n- PRESS CENTER\n- Extended Credit Facility\n- Extended Fund Facility\n- 21/98\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/12/19/pr22445-kenya-imf-exec-board-completes-4th-reviews-eff-ecf-arrangements-providing-usd-disbursement"
    }
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    "Published: December 19, 2022",
    "The Executive Board completed the Fourth reviews of the 38-month arrangements under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF).",
    "Immediate disbursement: SDR336.54 million (about US$447.39 million) usable for budget support.",
    "Augmentation under the ECF: SDR162.34 million (30 percent of quota, about US$215.81 million).",
    "Cumulative disbursements under the EFF/ECF arrangements reported as about US$1.655.59 million.",
    "Total amount under the EFF/ECF arrangements after the augmentation: SDR 1.818 billion (335 percent of quota or about US$2.416 billion).",
    "Near-term environment:",
    "Monetary and external:",
    "Fiscal performance:",
    "Progress reported:",
    "Delays and vulnerabilities:",
    "Fiscal policy:",
    "Monetary and external policies:",
    "Structural governance and transparency:",
    "Climate and inclusion:",
    "Output",
    "Prices",
    "Central government finances (fiscal year)1",
    "Money and Credit",
    "Balance of payments",
    "Exchange rate",
    "[https://www.imf.org/en/about/senior-officials/bios/antoinette-monsio-sayeh](https://www.imf.org/en/about/senior-officials/bios/antoinette-monsio-sayeh)",
    "[Kenya and the IMF](http://www.imf.org/external/country/KEN/index.htm)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[Extended Credit Facility](https://www.imf.org/en/About/Factsheets/Sheets/2016/08/02/21/04/Extended-Credit-Facility)",
    "[Extended Fund Facility](https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/20/56/Extended-Fund-Facility)",
    "[21/98](https://www.imf.org/en/News/Articles/2021/04/02/pr2198-kenya-imf-executive-board-approves-us-billion-ecf-and-eff-arrangements)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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