Kenya has reached a staff-level agreement with the International Monetary Fund (IMF), paving the way for the release of approximately $976 million (KES 126 billion), the IMF announced on Tuesday.
If the IMF’s Executive Board approves a second review of Kenya’s Resilience and Sustainability Facility, the country will gain immediate access to $120 million.
The IMF urged Kenya to revise its 2024/25 budget to incorporate additional revenue-raising measures. The need for domestic borrowing is expected to remain high due to a worsening primary fiscal balance in the previous financial year and a shortfall in tax collection.
Despite facing liquidity challenges since 2022, Kenya successfully issued a $1.5 billion Eurobond in February to partially buy back another Eurobond maturing in June, boosting investor confidence and strengthening the shilling against the dollar.
The IMF highlighted that fiscal adjustments in the 2024/25 budget could alleviate Kenya’s financial difficulties. “Authorities have taken decisive steps towards fiscal consolidation by introducing several measures in the context of the draft 2024/25 Budget and the 2024 Finance Bill,” the IMF stated.
Kenya’s finance minister is set to present the 2024/25 (July-June) budget to parliament on Thursday. Parliament has already approved overall spending of KES 4 trillion (USD31 billion) for the year, up from the KES 3.75 trillion initially presented for the 2023/24 year.
The 2024/25 budget will be accompanied by the Finance Bill 2024, which includes revenue-raising proposals that critics argue could adversely affect sectors such as financial services, transport, manufacturing, and retail.
Kenya’s current IMF program, totalling $3.6 billion, was agreed upon in April 2021, with the current review being the seventh under this agreement. Last week, the central bank governor announced that Kenya would use part of a $1.2 billion World Bank budget support loan to make a $500 million payment on a Eurobond maturing this month.
