Why Kenya lost IMF standby credit facility

The International Monetary Fund (IMF) stopped Kenya’s access to a $1.5 billion standby credit facility last June after they failed to agree with the government on a reduction of the fiscal deficit and a delayed review due to a prolonged election, it has now emerged.

“The programme has not been discontinued but access was lost in mid-June because a review had not been completed,” Jan Mikkelsen, the IMF resident representative in Kenya told Reuters.

“There was no agreement on the fiscal adjustment at the time and then I do believe the lengthy election period made it difficult to have a review and complete that in the period that followed,” he said.

However, despite this, the government has continued to report that the facility was still available.

At its meeting three weeks ago, Central Bank of Kenya (CBK)’s Monetary Policy Committee while retaining the Central Bank Rate at 10 basis points, said the country still had access to the facility.

READ: KTN snatches money show from KBC

“The CBK foreign exchange reserves currently stand at USD7,009 million (4.7 months of import cover). These reserves, together with the Precautionary Arrangements with the IMF, equivalent to USD1.5 billion, continue to provide an adequate buffer against short term shocks in the foreign exchange market,” CBK Governor Patrick Njoroge said in a statement after the meeting.

The facility was supposed to expire next month and a new one is currently being negotiated. An IMF delegation is in the country.

A team of Kenyan officials led by National Treasury Cabinet Secretary Henry Rotich has been abroad in the last one week conducting a roadshow for a planned sale of Eurobonds.