The International Monetary Fund (IMF) has approved Kenya’s request for 6th month extension to a US$1.5 billion standby facility that was to expire in March 2018. The request was made to allow the nation to complete reviews of the lender-supported programme.
“The Executive Board of the International Monetary Fund (IMF) today approved a new SDR 709.259 million (about US$989.8 million) 24-month Stand-By Arrangement (SBA) and a SDR 354.629 million (about US$494.9 million) 24-month Standby Credit Facility (SCF) for Kenya, for a combined SDR 1.06 billion (about US$1.5 billion, or 196 percent of Kenya’s quota).” Notes IMF in a press release sent to newsrooms
IMF noted that Kenya’s economy is robust and has a positive outlook. However, the economy remains vulnerable to extreme weather conditions and security threats.
Among the moves that the Kenyan government must be deliberate in doing include; maintaining inflation at 2.5 per cent to 5 per cent, reducing the fiscal deficit by 3 per cent of GDP over the next two years and improving public financial management to enhance transparency and efficiency.
“To achieve their inflation objective, the authorities will align the interbank rates with the policy rate and formally announce and implement an interest corridor, thereby strengthening the monetary policy transmission mechanisms in the context of a floating exchange rate regime,” notes Mr. Min Zhu, Deputy Managing Director and Acting Chair IMF
It is important to note that the SBA and SCF are precautionary arrangements where the government can withdraw only when we there are extreme shocks can lead to actual balance of payment needs
The government has the responsibility of strengthening the country’s macroeconomic environment to ensure that the economy grows above historical heights. The Recent move by President Kenyatta agreeing to work with the opposition will certainly create a favorable environment.