The International Monetary Fund (IMF) is pushing for controlled spending and restructuring of loss-making state corporations to protect Kenyan government revenues and reduce persistent budget deficits.
The fund, which is planning to release $244 million “in the coming weeks” to finance the country’s budget, said tight control of spending and a medium-term revenue strategy that is under development will help anchor deficit reduction in the years ahead.
It also underscored the importance of maintaining the momentum of reforms to tackle difficulties at financially-troubled state-owned enterprises (SOEs), including Kenya Airways (KQ) and Kenya Power.“At KQ, which had already benefited from a government guarantee on a large portion of its debt liabilities, steady progress on the ongoing restructuring effort will be important to minimise costs to the exchequer,” said the IMF mission led by Mary Goodman.
The IMF said it is satisfied with Kenya’s progress in economic reforms and the funding deal now awaits endorsement by the Fund’s management and board.
Kenya will access $244 million, bringing the total IMF support in a 38-month financing facility to $1.17 billion under the Extended Fund Facility (EFF) and Extended Credit facility (ECF).
In April 2021, the IMF board approved a $2.34 billion three-year financing package for Kenya to help support the government’s Covid-19 response, enhance governance and reduce debt vulnerabilities while safeguarding resources to protect vulnerable groups.
Between March 31 and April 22 the IMF staff engaged Kenya to discuss progress on reforms and authorities’ policy priorities in the third review of Kenya’s economic programme supported by the EFF and ECF.
In a statement on April 25, Ms Goodman said the Kenyan economy has experienced a robust recovery as the effects of the pandemic wane.“Spillovers from the war in Ukraine are expected to have a modest impact on growth in the near term, as Kenya’s direct exposure to Russia and Ukraine is relatively limited,” she said.
Kenya was hit hard by the Covid-19 pandemic, with the economy contracting to 0.1 percent in 2020, from 5.4 percent in 2019. The IMF projects a rebound to 5.7 percent in 2022.
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