The Executive Board of the International Monetary Fund (IMF) has approved the disbursement of a 78.3 billion shillings ($606.1 million) loan to Kenya, opening the way for new financing for the country following a lengthy review of the program following the withdrawal of the 2024 Finance Bill.
The disbursement, which was signed on Thursday morning, covers issuances under the seventh and eighth reviews of the Extended Credit Facility and Extended Fund Facility (ECF/EFF).
The new funding also marks the second review of the Resilience and Sustainability Fund (RSF) – a climate change-linked program to help Kenya implement mitigation measures.
The IMF and Kenyan authorities have agreed to combine the seventh and eighth reviews of the EFF/ECF programme, following a prolonged halt in funding due to rejection of new tax measures underpinning the arrangements.
However, the total amount disbursed is a far cry from the huge release the government expected from the dual review.
The National Treasury had expected to reserve Sh113 billion from the seventh and eighth audits.
The IMF did not give reasons for the lower spending but maintained the financial commitment under the ECF/EFF at 466.3 billion shillings ($3.61 billion) and the Rapid Support Fund at 69.9 billion shillings ($541.3 million).
The IMF noted that the withdrawal of the 2024 Finance Bill had disrupted Kenya’s path towards fiscal consolidation, but said the new framework represented by the first supplementary budget for 2024/25 was an appropriate corrective measure.
“Fiscal consolidation efforts faced headwinds following significant revenue shortfalls in the 2023/24 fiscal year and the withdrawal of the 2024 Finance Bill following widespread public protests. However, the ECF/EFF program succeeded in reducing inflation, strengthening external reserves and stabilizing Exchange rate.