Kenya has recently decided to decrease its planned borrowing from the International Monetary Fund (IMF) by 7.2 percent to Sh465.4 billion ($3.6 billion). This reduction comes after the country made a partial repayment of its Eurobond, which made global investors nervous. Additionally, the World Bank also reduced its budget support for Kenya by 20 percent to Sh155.2 billion ($1.2 billion) in recent weeks.
The IMF explained that the decrease in the credit facility for Kenya is due to the partial refinancing of a Eurobond worth Sh258.7 billion ($2 billion) that was set to mature on June 24. In February, Kenya raised Sh193.9 billion ($1.5 billion) through a new Eurobond issuance with a maturity date in 2031. The proceeds from this bond were used to buy back a portion of the Eurobond that was maturing in June.
The adjustment in the size of the IMF program comes after an increase of Sh121.3 billion ($938 million) was made last year to provide Kenya with affordable financing options to address the maturing Eurobond. The IMF Executive Board is set to approve a new arrangement that will adjust Kenya’s access to IMF resources to better align with the country’s current needs.
The Extended Credit Facility (ECF) provides medium-term financial assistance to low-income countries facing balance of payments issues. It is important to note that the Special Drawing Right (SDR) is an international reserve asset that can help boost a country’s liquidity.
With the IMF program size being reduced, Kenya will now have access to a loan that is Sh36.3 billion smaller than originally anticipated. The Extended Fund Facility (EFF) has been supporting Kenya since March 2021, offering financial assistance to countries dealing with medium-term balance of payments challenges.
The recent downgrade in the IMF program size also indicates that Kenya’s access to emergency financing has been reversed, suggesting that the economy is in a better position compared to before. Up to now, Kenya has received Sh337.3 billion ($2.6 billion) from the program through six performance-based disbursements.
Overall, Kenya’s decision to reduce its reliance on IMF debt has implications for the country’s financial situation and international relationships. By managing its borrowing and repayment strategies effectively, Kenya aims to strengthen its economic position and reduce its dependency on external financial assistance.
