IMF approves $ 258 million for Kenya budget support
The Executive Board of the International Monetary Fund (IMF) approved a total immediate disbursement of approximately $ 258.1 million, bringing Kenya’s total disbursements for budget support under the agreements to $ 972.6 million. dollars.
The international financial institution completed the 2021 Article IV consultation and second reviews of the 38-month extended arrangement under the Extended Financing Facility (EFF) and the 38-month arrangement in the under the Extended Credit Facility (ECF) for Kenya.
Kenya’s EFF / ECF agreements totaling $ 2.34 billion at the time of program approval on April 2, 2021 aim to support Kenya’s program to address debt vulnerabilities and their response to debt. Covid-19 pandemic and improve governance.
IMF Deputy Managing Director and Acting President Antoinette Sayeh said the Kenyan authorities have continued to show strong commitment to their reform agenda in a challenging environment and act to reduce debt vulnerabilities while now their support for economic recovery.
She said the East African country has maintained close public spending controls to limit the deficit and is taking steps to reform public enterprises (SOEs) to limit pressure on the budget while protecting programs. social.
“The Kenyan authorities remain firmly committed to their economic agenda in a difficult environment. The performance of the program has been robust. All quantitative targets have been met, fiscal year 2020/21 results have outperformed and all 2021 structural benchmarks are now met except one, ”said Ms. Sayeh.
Kenya has shown remarkable resilience in the face of the shock of Covid-19 in 2020 and is in the process of starting an economic recovery. Growth is now expected to accelerate to 5.9% in 2021.
Kenya’s vaccination program against Covid-19 accelerated in the second half of 2021, although uncertainty and pressures from the pandemic will persist until vaccinations become widely available, but the political timetable is also a source of uncertainty.
Kenya’s economic program aims to reduce debt vulnerability through multi-year fiscal consolidation efforts focused on increasing tax revenues and tight spending controls, while preserving resources to protect vulnerable groups.
Given Kenya’s limited fiscal space, the authorities are proactively managing difficult trade-offs to reduce debt vulnerabilities by streamlining non-priority spending to offset half of the impact of support to SOEs on the economy. deficit, in line with program commitments.
Kenya has also made notable progress in its structural reform and anti-corruption program.
Budget governance and transparency will be strengthened by the authorities’ action plan to eliminate legal obstacles that have prevented the publication of information on beneficial owners linked to public contracts and by the planned audits of expenditure on Covid-19 vaccines and of FY20 / 21 expenses with focus on Covid -19 related expenses.
As part of their strategy to meet the challenges of the SOE sector and put companies on a financially viable footing, the authorities are developing strong restructuring strategies backed by guarantees to protect the financial interests of the chessboard. The authorities also plan to further strengthen their monetary policy framework and continue to support financial stability.
Ms Sayeh urged the Kenyan authorities to continue to execute their multi-year fiscal consolidation plan to reduce debt vulnerabilities and additional fiscal space is needed in FY 21/22 for emergency spending to cope drought in the north and emerging security needs.
“The planned additional budget is also expected to provide resources to expand support for Covid-19 vaccinations and public enterprises, in accordance with the design of the program.
Strengthening domestic revenue mobilization, maintaining expenditure controls while protecting priority social spending and improving spending efficiency will remain essential. Bold political commitment from all levels of government is needed to ensure that the fiscal year 22/23 budget is aligned with the authorities’ agenda, ”said the Deputy Director General.
She added: “Proactive efforts to address the fiscal risks of SOEs should continue. Financial support for SOEs will require difficult tradeoffs and adequate collateral given Kenya’s limited fiscal space and the need to maintain debt sustainability.
The IMF has said that strengthening fiscal transparency and governance requires more proactive efforts in removing legal barriers to start publishing beneficial ownership information for public tenders awarded in early 2022, proceeding with planned audits of Covid-19 spending and act quickly to follow up on previous audits. .
Well-calibrated policies of the Central Bank of Kenya have supported economic resilience and the banking sector. The stance of monetary policy should remain accommodative as long as inflation expectations remain firmly anchored.
“The program is subject to increasing global and national risks, including from the pandemic, tighter global funding conditions and potential pressures from the upcoming political calendar. Kenya’s medium-term outlook remains positive and the authorities’ continued commitment to their economic program is essential to maintain macroeconomic balance, while ensuring more sustainable, greener and inclusive growth, ”the press release read. IMF.