NAIROBI — The International Monetary Fund (IMF) said its executive board has approved the seventh and eighth reviews of Kenya's program, allowing the East African nation to receive 606 million US dollars.
The funds will support Kenya's efforts to rebuild fiscal and external buffers as well as enhance resilience to climate shocks, the IMF said in a statement issued Wednesday evening.
The loan facility, which will be disbursed immediately, would bring the IMF's total funding under the existing Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements to 3.61 billion dollars.
IMF First Deputy Managing Director Gita Gopinath said Kenya's economy remains resilient, with growth above the regional average, inflation decelerating, and external inflows supporting the shilling and a buildup of external buffers, despite a difficult socioeconomic environment.
"Given the elevated risks around the fiscal strategy, policymaking needs to be agile," she said. "Contingency planning remains critical, with policies adapting to evolving outcomes to safeguard stability and ensure that program objectives continue to be met."
The IMF said the resolution of the exceptional external financing pressure earlier this year has revived market confidence, aided the stabilization of the shilling, and enabled a faster buildup of foreign exchange reserves, Xinhua news agency reported.
It, however, said that large revenue shortfalls in the 2023/2024 fiscal year and pushbacks against revenue measures owing to governance concerns pose a challenge to the ongoing fiscal consolidation efforts.
The Kenyan authorities face a difficult balancing act of boosting domestic revenues to protect critical spending in priority areas while meeting heavy debt service obligations.
It said delivering on this would call for improving governance and transparency to restore public trust in the effective use of public resources.
Gopinath said a difficult adjustment path lies ahead, noting that a credible fiscal consolidation strategy remains central to addressing debt vulnerabilities while protecting social and development spending.
She said reforms to make the tax regime more efficient, equitable, and progressive as well as strengthening accountability, transparency, and efficiency of public finances, will help garner political and societal support.