NAIROBI, Nov. 16 (Xinhua) -- The International Monetary Fund (IMF) said Thursday it has reached a staff-level agreement with Kenya, paving the way for the release of 682.3 million U.S. dollars loan early next year.
The IMF team led by Haimanot Teferra, which ended its two-week mission to Kenya on Wednesday, said the deal is subject to IMF management approval and consideration by the executive board, which is expected in January 2024.
The IMF said in a statement that the tightening global financing conditions for frontier economies and global geopolitical tensions are compounding the challenges from the legacy of the pandemic and multi-season drought, further straining Kenya's balance of payments and fiscal financing requirements.
Accordng to the statement, the agreement on economic policies and reforms now concludes the sixth review of Kenya's extended credit facility and extended fund facility arrangements which were approved in 2021 and extended by 10 months on July 17, 2023, to support Kenya in maintaining robust and inclusive growth.
The lender also said it reached an agreement on the augmentation of access under those arrangements, and the first review of the Resilience and Sustainability Facility.
Kenya's economy has displayed resilience, with real gross domestic product expanding by 5.4 percent in the first half of 2023, primarily due to a robust recovery in the agriculture sector following the return of rains, the statement said. In the fiscal year 2022/23, the IMF said, the primary deficit came in as expected at 0.6 percent of GDP, reflecting tight expenditure management in light of tax revenue shortfalls.
"Financing conditions continue to be challenging. With a tightening of monetary policy in June, and tighter liquidity conditions, yields on government bonds have experienced a notable upward trend," the statement said, adding that the external current account deficit has narrowed, driven by a recovery in the tourism sector to pre-COVID-19 levels, resilience in remittances, reductions in imports and a real exchange rate depreciation.
The lender cautioned that despite continued commitment to the implementation of the IMF-supported economic program which is broadly on track, uncertainty looms over Kenya's effective access to international bond markets. "This uncertainty is exerting substantial pressure on liquidity, primarily due to the sizable Eurobond maturing in 2024," it said.