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IMF, Kenya seal staff-level agreement, recommends fiscal consolidation

Published

5 months ago

June 12, 2024

The International Monetary Fund (IMF) and Kenya struck a staff-level agreement on Tuesday, according to the multilateral body, opening the door to the payment of roughly $976 million.

The fund stated that it would have instant access to $120 million provided its Executive Board approved a second review of Kenya’s Resilience and Sustainability Facility.

Additionally, the lender recommended the East African country to modify its 2024–2025 budget to incorporate more measures aimed at increasing income, given that a decline in the primary fiscal balance during the preceding fiscal year and a shortfall in tax collections were anticipated to maintain high domestic borrowing needs.

Kenya has struggled with cash since 2022, but in February it was able to partially repurchase another Eurobond that is expiring in June by selling a new $1.5 billion Eurobond from international markets, albeit at a hefty price.

The shilling strengthened versus the dollar as a result of the issuance, which also allayed investor fears about a possible default and restored trust in the economy among foreign investors. The fund suggested that making changes to the budget for 2024–2025 could help.

“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.

On Thursday, the finance minister will provide the parliament the budget for 2024–2025 (July–June). Parliament approved 4 trillion shillings ($31 billion) for the year’s total spending, which is more than the 3.75 trillion shillings the minister had given in June of last year for the 2023–2024 fiscal year. Later on, the budget was changed to 3.85 trillion shillings.

The Finance Bill 2024, a separate law including revenue-raising recommendations that some claim might bankrupt industries like financial services, transportation, manufacturing, and retail, will be introduced with the 2024–2025 budget.

The current $3.6 billion IMF agreement with Kenya was reached in April 2021. This evaluation is the seventh that the program has conducted.

Kenya will utilize a portion of a $1.2 billion World Bank budget support loan to pay around $500 million toward a maturing Eurobond this month, according to the central bank governor’s announcement last week.

VenturesNow

IMF mission concludes 4th loan program assessment in Egypt

Published

57 minutes ago

November 22, 2024

Ifeoluwa Dada

Following the completion of a recent visit to Egypt, the International Monetary Fund (IMF) has announced that its mission had achieved significant strides in policy talks aimed at concluding the fourth review of the IMF loan program.

The review is the fourth in Egypt’s most recent 46-month IMF loan program, which was authorised in 2022 and increased to $8 billion this year following an economic crisis characterised by high inflation and chronic foreign exchange shortages. It may unleash more than $1.2 billion in financing.

Along with reaffirming its commitment to maintain a flexible exchange rate system, the IMF stated that Egypt “has implemented key reforms to preserve macroeconomic stability,” including the unification of the currency rate that facilitated imports.

Earlier on Wednesday, Egypt’s Prime Minister Mostafa Madbouly said Cairo has asked the IMF to modify the targets for the programme not only for this year, but for its full duration, he added without giving more details.

“Discussions will continue over the coming days to finalize agreement on the remaining policies and reforms that could support the completion of the fourth review,” the IMF added in its statement.

VenturesNow

Kenya seeks $750m from World Bank, obtains $200m from AfDB— Official

Published

2 days ago

November 20, 2024

Ifeoluwa Dada

The head of debt management for the finance ministry told Reuters that Kenya had obtained a $200 million loan from the African Development Bank (AfDB) and was negotiating a fresh $750 million loan with the World Bank.

After being forced to abandon proposed tax rises costing more than 346 billion shillings ($2.68 billion) in June due to fatal demonstrations, the East African nation’s administration, which has been grappling with significant debt, has been frantically seeking fresh funding.

The Finance Ministry’s public debt management office director general, Raphael Owino, told Reuters that the IMF’s October clearance of the seventh and eighth reviews, which opened the door for a $606 million loan tranche, had aided the ministry’s talks for more loans.

“The World Bank is coming on board, riding on the back of IMF receipts,” Owino said. “The AfDB is already on board.”

The discussions for more assistance, which came under the World Bank’s “Development Policy Operations” (DPO) with the government, were confirmed by a representative at the organization’s Kenya office.

“The amount of the current (loan) is yet to be determined. The amount will also depend on the implementation of the policy reforms agreed upon,” the spokesperson told Reuters, adding that past DPO loans averaged about $750 million.

In May, the World Bank approved the latest round of DPO loans, totalling $1.2 billion.

According to a statement made last month by Finance Minister John Mbadi, Kenya has set a foreign borrowing goal of 168 billion shillings for the fiscal year ending in June 2025.