Kenya gets additional $938m from IMF
The International Monetary Fund will expand its financing to Kenya by $938 million to bolster the East African nation’s reserves before a eurobond repayment due in June.
The funding, which still requires IMF board approval, would result in the Washington-based lender granting Kenya immediate access to around $682 million, the fund said in a statement Thursday.
“The authorities’ strong reform program aims to enhance the policy framework substantially and restore confidence to ensure access to the global bond market,” said Haimanot Teferra, who led the IMF team in Kenya. “Steadfast implementation of a package of mutually reinforcing policies remains the key to sustain macroeconomic stability,” she said.
The money will help the government address its precarious public finances, including repaying a $2 billion eurobond that falls due in June, while supporting the shilling — Africa’s sixth worst-performing currency tracked by Bloomberg this year.
The IMF’s board is expected to consider the agreement for approval in January.
In May, the IMF agreed to boost its financing package to Kenya by 45% to $3.5 billion and extend the duration of the 38-month program by 10 months to April 2025. The latest agreement lifts that total support to around $4.43 billion.
The 2024 bond has been a focal point for investors worrying about the nation’s debt burden as it faces elevated energy and food import bills, with limited foreign exchange to fund the shortfalls. President William Ruto plans an early repayment of $300 million in December.
“Despite continued commitment to the implementation of the IMF-supported economic program which is broadly on track, persistent uncertainty looms over Kenya’s effective access to international bond markets,” said Teferra. “This uncertainty is exerting substantial pressure on liquidity, primarily due to the sizeable external debt service payments anticipated in 2024.”
The East African nation has been reluctant to consider refinancing the debt in capital markets because of the current high level of interest rates. In an interview with Bloomberg last month, Treasury Secretary Njuguna Ndung’u said Kenya is weighing borrowing from multilateral and bilateral lenders to help repay the eurobond.
“On the upside, should investor confidence recover fully, a virtuous cycle of inflows could stabilize the exchange rate and bring down inflation to the target faster than expected,” Teferra said. “On the domestic front, the key downside risk is that the policy shift now underway, if loses its momentum, could erode confidence and lead to increased FX demand and reserve drain.”
