NewsEast & Horn AfricaKenya asks IMF for a 6-month extension of $1.5bn standby credit


Posted on Thursday, 08 March 2018 14:07

Kenya asks IMF for a 6-month extension of $1.5bn standby credit

By Reuters

Alex Brandon/AP/SIPAKenya has asked the International Monetary Fund (IMF) to extend its $1.5 billion standby credit facility that expires in March for a further six months, the IMF said.

The IMF said last month that Kenya had already lost access to the funds meant to cushion it against unforeseen external shocks last June because of a failure to complete a review of the programme.

In a statement issued on Wednesday at the end of an assessment mission to Nairobi, the IMF said the request for an extension would be put to the board before the facility expires on March 13.

The Washington-based IMF said the government had committed to reduce the fiscal deficit and substantially modify interest controls, imposed on banks in 2016, which have been partly blamed for choking private sector credit growth.

"Discussions on the details of these policies will continue in the coming weeks," the IMF said in a statement, adding a full review of the two-year programme was expected to be completed in September.

The restoration of access to an extended facility would still be subject to the completion of the full review, the fund said on Thursday.

Both sides had agreed the fiscal deficit would be reduced to 7.2% of GDP in the 2017/18 (July-June) fiscal year, from 8.8% in the prior further, and to 5.7% in 2018/19, the IMF said, broadly in line with the plan published by the finance ministry before the talks started.

Continue economic reforms

"This will be achieved by a combination of revenue measures and contained spending," the IMF said.

It said Kenya's economic growth was expected to rise to 5.5%  this year, after elections and drought depressed output to an estimated 4.8% last year.

"Annual growth could rise further to 6.5% within a couple of years, provided that the authorities continue economic reforms, including reducing the fiscal deficit and amending interest rate controls," the IMF said.

Finance ministry officials have told local media they want to introduce a consumer protection law to parliament this year to modify the rate caps, while a senior lawmaker told Reuters last month the most likely modification was the removal of a floor on deposit rates.

The caps compelled lenders not to charge their customers more than 400 basis points above the central bank rate, which stands at 10% now, and to offer a minimum deposit rate of 70% of the central bank rate.


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