WASHINGTON, USA
The Executive Board of the International Monetary Fund (IMF) has approved an aggregate immediate disbursement of about $258.1 million, bringing Kenya’s total disbursements for budget support under the arrangements to $972.6 million.
The is after the international financial
institution completed the 2021 Article IV Consultation and the Second reviews
of the 38-month Extended Arrangement under the Extended Fund Facility (EFF) and
38-month arrangement under Extended Credit Facility (ECF) for Kenya.
Kenya’s EFF/ECF arrangements for a total of
$2.34 billion at the time of programme approval on April 2, 2021 are aimed at
supporting Kenya’s programme to address debt vulnerabilities and their response
to the Covid-19 pandemic and at enhancing governance.
IMF Deputy Managing Director and Acting
Chairperson Antoinette Sayeh said Kenyan authorities have continued to show
strong commitment to their reform agenda in a challenging environment and are
acting to reduce debt vulnerabilities while maintaining support for the
economic recovery.
She said the East African country has
maintained careful control of government spending to limit the deficit and are
taking steps to reform state-owned enterprises (SOEs) to limit pressure on the
budget while protecting social programmes.
“The Kenyan authorities remain firmly committed
to their economic programme in a challenging environment. The programme
performance has been robust. All quantitative targets were met the FY 2020/21
outturn overperformed and all 2021 structural benchmarks are now completed
except one,” said Ms Sayeh.
Kenya showed remarkable resilience to the
Covid-19 shock in 2020 and is staging an economic recovery. Growth is now
estimated to accelerate to 5.9 percent in 2021.
Kenya’s Covid-19 vaccination programme has
picked up speed in the second half of 2021, though uncertainty and
pandemic-related pressures will persist until vaccinations become widely
available but the political calendar is also a source of uncertainty.
Kenya’s economic programme aims to reduce debt
vulnerabilities through multi-year fiscal consolidation efforts centered on
raising tax revenues and tightly controlling spending, while safeguarding
resources to protect vulnerable groups.
Given Kenya’s limited fiscal space, the
authorities are proactively managing difficult trade-offs with the view to
reduce debt vulnerabilities by rationalising non-priority spending to offset
half of the impact of SOE support on the deficit, in line with programme
commitments.
Kenya has also made notable advances on its
structural reform and anti-corruption agenda.
Fiscal governance and transparency will be
bolstered by the authorities’ action plan to address legal impediments that
prevented the publication of beneficial ownership information related to public
procurements and by planned audits of Covid-19 vaccine spending and of FY20/21
expenditure with a focus on Covid-19-related spending.
As part of their strategy to address challenges
in the SOE sector and put firms on a financially viable footing, the
authorities are formulating robust restructuring strategies with safeguards to
protect the Exchequer’s financial interest. The authorities also plan to
further enhance their monetary policy framework and to continue supporting
financial stability.
Ms Sayeh urged Kenyan authorities to continue
executing their multi-year fiscal consolidation plan to reduce debt
vulnerabilities and some additional fiscal space is needed in FY21/22 for
emergency spending to face the drought in the north and emerging security
needs.
“The planned supplementary budget should also
provide resources for expanding Covid-19 vaccinations and SOEs support, in line
with program design.
Strengthening domestic revenue mobilisation,
maintaining expenditure control while protecting priority social spending and
improving spending efficiency will remain essential. Bold political commitment
by all levels of government is needed to ensure the FY22/23 budget is aligned
with the authorities’ program,” said Deputy managing director.
She added, “Proactive efforts to address fiscal
risks from SOEs should continue. Financial support to SOEs will require
difficult tradeoffs and adequate safeguards given Kenya’s limited fiscal space
and the need to maintain debt sustainability.”
The IMF said further strengthening fiscal
transparency and governance requires more proactive efforts by addressing legal
impediments to begin publishing beneficial ownership information for awarded
public tenders in early 2022, proceed with planned audits of Covid-19 spending,
and promptly act to follow up on previous audits.
Well-calibrated Central Bank of Kenya policies
have supported economic resilience and the banking sector. The stance of
monetary policy should remain accommodative as long as inflation expectations
remain well anchored.
“The programme is subject to increasing global
and domestic risks, including from the pandemic, tightening global financing
conditions, and potential pressures from the upcoming political calendar.
Kenya’s medium-term prospects remain positive, and the authorities’ continued
commitment to their economic program is essential to maintain macroeconomic
balance, while ensuring a more sustainable, greener, and inclusive growth,”
read part of IMF statement.
No comments:
Post a Comment