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Kenya has reached a staff level agreement with the International Monetary Fund yesterday, the organisation said, paving the way for the disbursement of about US$976 million.
The fund said in a statement that if its Executive Board approves a second review of Kenya’s Resilience and Sustainability Facility, it would have immediate access to US$120 million.
The lender also urged the East African nation to adjust its 2024/25 budget to include more revenue raising measures, as a worsening in the primary fiscal balance in the previous financial year and a tax collection shortfall was expected to keep domestic borrowing needs high.
Although Kenya has been facing liquidity challenges since 2022, it managed to sell a new US$1,5 billion Eurobond from international markets in February, albeit at a steep price, to partly buy back another Eurobond that is maturing in June.
The issuance assuaged investor concerns about a potential default, restored foreign investors confidence in the economy and caused the shilling to strengthen against the dollar. The fund said fiscal adjustments for 2024/25 could remedy the situation.
“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,” it added.
The finance minister is due to present the 2024/25 (July-June) budget to parliament on Thursday. Parliament approved overall spending for the year at 4 trillion shillings (US$31 billion), up from the 3,75 trillion shillings the minister presented last June for the 2023/24 year. That budget was later adjusted to 3,85 trillion shillings.
The 2024/25 budget will be accompanied by the Finance Bill 2024, a separate law outlining revenue-raising proposals, which some critics say could cripple sectors including financial services, transport, etc. Reuters.
Bongani Ndlovu
Online Reporter