IMF and Kenya reach initial agreement to access $1.1bn

BREAKING NEWSJune 11, 2024 at 12:35 PM UTC

TLDR

Kenya secures potential $976 million disbursement from IMF after staff-level agreement.
IMF advises Kenya to revise 2024/25 budget for additional revenue-raising measures.
Recommendation based on previous year's fiscal balance deterioration and tax collection shortfall.

Kenya has reached a staff-level agreement with the International Monetary Fund, potentially leading to the disbursement of about $976 million, the IMF announced on Tuesday.

If the IMF Executive Board approves a second review of Kenya’s Resilience and Sustainability Facility, the country would immediately access $120 million.

The IMF also advised Kenya to revise its 2024/25 budget to incorporate additional revenue-raising measures. This recommendation comes in light of a deteriorated primary fiscal balance in the previous financial year and a shortfall in tax collection, which are expected to maintain high domestic borrowing needs.

Key Takeaways

Despite facing liquidity challenges since 2022, Kenya issued a $1.5 billion Eurobond in February to partly buy back a Eurobond maturing in June. Although the issuance came at a high cost, it alleviated investor concerns about a potential default, restored foreign investor confidence in the economy, and strengthened the Kenyan shilling against the dollar. The IMF noted that fiscal adjustments in the 2024/25 budget could further improve the situation. Kenya’s current deal, which is for a total of $3.6 billion, was agreed in April 2021. The current review is the seventh under the program.

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Kenya

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Economy

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