The International Monetary Fund (IMF) considers Kenya’s external position strong despite the expiry of a stand-by loan facility that shielded the country from external shocks.
IMF Resident Representative in Kenya Jan Mikkelsen told Reuters news agency the Fund would continue to support its reform efforts.
Kenya had secured a six-month extension in March of the $989.8 million arrangement. However, the IMF set conditions for a further extension, including the repeal of a cap on commercial lending interest rates which was imposed in 2016, a move that Parliament rejected in a Finance Bill last month.
President Uhuru Kenyatta sent the Bill back to Parliament on Thursday night, but what happens next regarding the rate cap is not yet clear.
Treasury mandarins have played down the significance of the expiry of the deal, which was agreed in 2016 to help cushion the economy in case of unforeseen external shocks that could upset the balance of payments. No funds were ever drawn down.
However, National Treasury Cabinet Henry Rotich said on Thursday talks with the Bretton Woods institution would now focus on the next type of facility Kenya could secure.
“The IMF will continue to support Kenya’s reform efforts through policy advice and capacity development,” Mikkelsen told Reuters, without giving more details.
National Treasury Kamau Thugge had said on Thursday that the expiry would not hurt the economy.
Rotich tried to repeal the rate cap in his June budget, but the National Assembly voted to keep the upper limit while getting rid of a minimum deposit rate it had previously imposed.
The rate cap was aimed at helping small traders access capital at affordable rates, but has had the opposite effect, with banks saying they cannot price risk to small and medium enterprises (SMEs) properly while the cap is in place.
As a result, lending to the private sector fell from 9.3% in 2016 to 2.4% last year.
The President is due to address the nation on Friday, after rejecting the finance bill which also sought to postpone a widely unpopular tax on fuel.