Kenya and the International Monetary Fund (IMF) have sealed a staff-level agreement on the seventh review of Kenya's Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements, along with the second review under the Resilience and Sustainability Facility (RSF) arrangement, IMF said in a statement. As per the two agreements, if approved by the IMF's Executive Board, it will adjust the total remaining access shall be adjusted to 135.55 per cent of the quota, totalling approximately US$976 million. This includes a proposed recalibration of 21.67 per cent of the quota towards zero-interest concessional resources under the ECF arrangement, amounting to around US$156 million. The total IMF financial commitment during the EFF/ECF programme period would thus reach about US$3.60 billion. The policy package targets debt sustainability, fiscal stability, and inclusive growth, highlighted by a strategic Eurobond repurchase. "Growth recovered in 2023 with real GDP growing by 5.6 percent, supported by a strong recovery in agriculture and resilience in the services sector following the return of rains after the severe droughts in 2021-22. However, the unfortunate losses of lives, displacement of people, and destruction of infrastructure and agricultural land from the recent floods have strained resources and highlighted the urgent need for comprehensive disaster risk management as well as support from both national and international stakeholders to respond to the immediate needs and to rebuild a more resilient infrastructure. "Headline inflation has decelerated to 5.1 per cent in May 2024, aided by lower food prices, stabilisation of fuel pump prices, appreciation of the exchange rate, and base effects from last year's electricity tariff adjustments. However, core inflation remains persistent. Refinancing risks associated with the June 2024 Eurobond have dissipated following a successful partial buyback from the proceeds of a new Eurobond issuance in February. Sovereign spreads have returned to mid-2022 levels. Improved market sentiment has fostered a recovery in net capital inflows and contributed to the appreciation of the shilling," said IMF team head, Ms. Haimanot Teferra.
