IMF approves Sh152bn precautionary loan for Kenya

March 15, 2016
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The National Treasury forecasts fiscal deficit will decline to 4.1percent of Gross Domestic Product (GDP) by fiscal year 2018/2019 from 8.9percent in fiscal year 2014/2015/FILE
The National Treasury forecasts fiscal deficit will decline to 4.1percent of Gross Domestic Product (GDP) by fiscal year 2018/2019 from 8.9percent in fiscal year 2014/2015/FILE

, NAIROBI, Kenya, Mar 15 – The International Monetary Fund (IMF) has approved Kenya’s application for a total of Sh152.3billion ($1.5billion) in a precautionary credit facility.

Precautionary arrangements are used when countries do not intend to draw on approved amounts, but retain the option to do so should they need it.

IMF Deputy Managing Director and Acting Chair Min Zhu says the decision by the IMF executive board follows Kenya’s commitment to only use the credit facility in the event of exogenous shocks with a negative impact on balance of payments.

“Kenya’s recent growth performance remains robust and the outlook is positive. Despite positive policy steps undertaken under the current Fund-supported program, the economy remains vulnerable to shocks, reflecting less favourable global financial market conditions, as well as continued security threats and potential extreme weather events,” Zhu said.

In this context, he says, the new precautionary arrangements would provide a policy anchor for continued macroeconomic and institutional reform, and would help mitigate the impact of potential exogenous shocks if they were to materialise.

IMF has also noted that the Central Bank of Kenya expressed commitment to gradually reduce inflation to the mid-point of its target range (5 to 2.5 percent).

“The authorities are taking actions to preserve financial stability. These include steps to strengthen micro and macro prudential stress testing and the capital adequacy assessment framework, and develop a legal and operational crisis management system,” the IMF boss said.

Continued improvement in the quality of macroeconomic statistics and strengthening the business climate will be key to promoting transparency and evidence-based policy making, and supporting inclusive growth.

The National Treasury forecasts fiscal deficit will decline to 4.1percent of Gross Domestic Product (GDP) by fiscal year 2018/2019 from 8.9percent in fiscal year 2014/2015.

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