The International Monetary Fund (IMF) Executive Board has completed the seventh and eighth reviews under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements, as well as a review under the Resilience and Sustainability Facility (RSF) arrangement with Kenya. These reviews were initially approved in April 2021 and July 2023, respectively.
The EFF/ECF programs are designed to help Kenya address debt vulnerabilities while safeguarding resources for essential social and developmental needs. They also aim to build resilience to shocks, improve governance, and support broader economic reforms. The RSF arrangement focuses on reinforcing Kenya’s efforts to tackle climate-related challenges and encourage private climate finance.
Following these reviews, the IMF's Executive Board has authorized immediate disbursements of SDR365.28 million (approximately US$485.8 million) under the EFF/ECF arrangements and SDR90.47 million (about US$120.3 million) under the RSF arrangement. A reduction in total access under the EFF/ECF arrangements was also approved, moving from exceptional access granted in January 2024 to within normal limits.
Total IMF financial commitment for Kenya stands at SDR2.714 billion (around US$3.61 billion), with SDR2.343 billion already approved for disbursement under the EFF/ECF arrangements. For the RSF arrangement, these amounts are SDR407.1 million (about US$541.3 million) with SDR135.70 million approved for disbursement.
The Executive Board acknowledged that resolving exceptional external financing pressures earlier this year restored market confidence, aiding in stabilizing the shilling and building reserves more rapidly. However, fiscal consolidation efforts faced challenges due to significant tax revenue shortfalls in FY2023/24 and public protests leading to the withdrawal of the 2024 Finance Bill.
Despite these setbacks, progress was noted in reducing inflation, strengthening external buffers, and stabilizing exchange rates through the EFF/ECF program. Waivers were granted for non-observance of tax revenue targets based on corrective actions taken via a supplementary budget for FY2024/25.
In her statement following the board's discussions, Ms. Gita Gopinath, First Deputy Managing Director of the IMF and Acting Chair, said: “Kenya’s economy remains resilient... despite a difficult socio-economic environment.” She emphasized that sustaining progress requires improvements in fiscal adjustments, governance reforms, and structural agendas including climate-related reforms.
Ms. Gopinath highlighted that "a credible fiscal consolidation strategy remains central" alongside necessary tax regime reforms to maintain societal support for changes.
The Central Bank of Kenya’s measures have been crucial in supporting price stability and external sustainability by improving monetary policy frameworks and foreign exchange markets functioning.
Fast-tracking key reforms is seen as essential for raising medium-term potential by addressing governance deficiencies and attracting investments needed for climate resilience development.