Kenya expects to receive additional funding from the International Monetary Fund (IMF) by the end of the year and is currently in discussions with the IMF about potentially combining the seventh and eighth reviews of its support programme, according to the governor of Kenya’s central bank.
In early June, Kenya and the IMF reached a staff-level agreement on the seventh review of its $3.6 billion (approximately Ksh.446.4 billion) programme. However, the review has not yet been approved by the IMF’s executive board due to the government’s decision to scrap proposed tax hikes and implement spending cuts in late June following mass protests, which turned deadly.
“We are in the final stages of an agreement (with the IMF). The fiscal framework has been agreed,” Central Bank of Kenya Governor Kamau Thugge said in a news conference. This update comes a day after the Central Bank cut its benchmark lending rate by another 75 basis points.
Kenya has also requested the IMF to conduct an official assessment of corruption and governance issues. While this assessment is not directly linked to the next disbursement, it is part of efforts to build goodwill with the IMF as Kenya works to stabilize its finances.
In addition, Governor Thugge mentioned that the central bank has been purchasing dollars in the foreign exchange market to bolster Kenya’s reserves against potential short-term shocks. He reiterated that the bank has no specific target for the exchange rate but intervenes in the market to smooth out volatility.
The exchange rate is being supported by dollar inflows from agricultural exports, remittances, and foreign investor interest in local securities due to high interest rates. Thugge also reaffirmed the bank’s forecast of 5.5% economic growth for next year, although the bank recently lowered its 2024 growth projection to 5.1% from 5.4% due to slower growth in the second quarter.
Thugge added that there may be room for local interest rates to decrease further, given the stability of the shilling exchange rate.
