NAIROBI, Kenya, Feb 21 – The International Monetary Fund (IMF) has refuted claims that Kenya lost access to its $1.5 billion (Sh150 billion) standby loan in June clarifying that the precautionary financing remains in place until the end of March 2018.
IMF representative in Kenya Jan Mikkelsen says the government continues to have access to resources since last June, “subject to policy understanding and to complete the outstanding reviews.”
Mikkelsen adds that the second and third reviews of the program that was due in June and December 2017 could not be completed on schedule due to the prolonged election period.
The funds, approved by the IMF in March 2016, were available for Kenya to access if it faced shocks that led to a balance-of-payments crisis.
Mikkelsen says an IMF team is currently in Nairobi for discussions on a possible new programme and there is hope for an agreement.
Kenya’s pre-cautionary facility is comprised of $495m in interest-free credit repayable over eight years (Standby Credit Facility – SCF) and a $990m arrangement repayable with interest over five years.
The loan is subject to treasury narrowing the budget deficit to 3.7 percent of GDP in the 2018/19 budget from the 8.9pc currently to reduce the risk of debt distress while providing space for spending priorities.
“It is unlikely the economy will be affected in the short-term (in the event the facility is withdrawn) but in the event of an exogenous shock on the economy, Kenya will likely be more exposed to volatility that could affect the stability of the Kenya shilling, which creates unnecessary imbalances in the movement of imports and exports and could avert foreign direct investments,” says Cliff Bakashaba, Investment Associate at Nabo Capital.
Stand-By Arrangements (SBA) are a common IMF assistance tool for both emerging and advanced economies to meet short-term or potential balance of payments problems.
In Africa, only Kenya currently benefits from an active SBA agreement