The International Monetary Fund’s (IMF) Executive Board announced that it had completed its fifth review of Kenya’s Extended Fund Facility and Extended Credit Facility (EFF/ECF) arrangements, resulting in significant developments for the country’s economic stability and climate resilience. In a move to support Kenya’s reform agenda and enhance its ability to tackle climate change challenges, the IMF has approved a series of measures aimed at enhancing the nation’s financial standing and promoting sustainable practices.
From the decision made by the board, Kenya will receive an immediate disbursement of Kes 58.9 billion (USD 415.4 million), including Kes 15.6 billion (USD 110.3 million) from an augmentation of access. Furthermore, the IMF’s Executive Board has approved a 20-month arrangement under the Resilience and Sustainability Facility (RSF), totalling Kes 551.4 billion (USD 551.4 million). This approval is intended to fortify Kenya’s efforts in building resilience against the impacts of climate change and to attract additional private investment towards climate-related initiatives.
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In light of the comprehensive objectives outlined in Kenya’s reform program, the EFF/ECF arrangements have been extended from 38 months to 48 months, with the revised duration set to conclude in April 2025. This extension provides the necessary time for the government to implement its reform agenda effectively and attain the program’s key objectives. Additionally, the extended duration will facilitate balance of payments support through increased access to the facility.
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Recognizing Kenya’s commendable progress in implementing economic reforms, particularly in the face of severe drought and a challenging external environment, the IMF’s Executive Board emphasizes the significance of the RSF-supported program. The RSF aims to integrate climate-related considerations into Kenya’s macro policies and frameworks through various reform measures. These measures include adopting green public financial management practices, implementing climate-sensitive public investment management strategies, introducing carbon pricing mechanisms, enhancing frameworks for mobilizing climate finance, and strengthening disaster risk reduction and management systems.
The approval of the FY2023/24 Budget and the 2023 Finance Act are considered pivotal milestones in supporting Kenya’s ongoing efforts to reduce debt vulnerabilities while safeguarding social and development expenditures. Nevertheless, recent challenges in resource mobilization and increased uncertainty necessitate the formulation of contingency plans to address fiscal performance. Given the tighter financing conditions, it is imperative for Kenya to adopt a prudent debt policy and sustain its prioritization of concessional loans.
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Overall, the IMF’s latest decisions and approvals demonstrate its commitment to supporting Kenya’s economic stability and sustainability efforts. By providing crucial financial resources, extending program duration, and acknowledging the progress made, the IMF aims to foster an environment conducive to long-term growth, resilience, and climate-conscious development in Kenya.
