Kenya is poised to receive a significant financial injection with a $1 billion disbursement expected from the International Monetary Fund (IMF) next month. This news comes as a welcome development for the nation’s economy, which has weathered a debt crisis earlier this year and is now showing signs of improvement.
President William Ruto expressed confidence in securing the IMF funds, highlighting the positive trajectory of the Kenyan economy. This follows the successful issuance of a $1.5 billion Eurobond in February, a move that calmed market anxieties surrounding a potential default on a maturing $2 billion bond in June.
Previously, the Kenyan shilling faced significant depreciation, adding to economic woes like high inflation and rising living costs caused by new taxes implemented to address budget deficits.
However, timely financial support from the IMF and World Bank, including a $941 million loan from the IMF in January, has proven instrumental in stabilizing the situation. Notably, the Kenyan shilling has emerged as the world’s best-performing currency in 2024, following the remarkable gains against the US dollar.
Notably, the January $941 million loan from the IMF brought the size of its programme with the fund to $4.43 billion, with around $2.5 billion outstanding.
President Ruto further emphasized the ongoing review process by IMF officials scheduled for May 9th, which is expected to pave the way for the $1 billion disbursement. “That process is going on very well,” he said in an interview on Monday.
He also mentioned the productive discussions held with the Kenyan Finance Minister and IMF representatives during the recent World Bank/IMF spring meetings. While the IMF has yet to officially comment on the ongoing review, the positive outlook is encouraging.
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Despite recent devastating floods that have caused significant financial strain and loss of life, President Ruto remains committed to his earlier pledge of a 12% reduction in government spending for the upcoming fiscal year from Ksh4.2 trillion to Ksh3.7 trillion.
The fiscal deficit is projected to narrow to 3.9 percent of gross domestic product (GDP) in 2024/25 financial year (July-June) from 4.9 percent in this financial year. Additionally, the nation continues to benefit from approximately $2 billion in annual concessional financing from the World Bank.
Kenya is poised to surpass Angola and become the fourth largest economy in sub-Saharan Africa this year, according to an International Monetary Fund (IMF) forecast. This position is expected to be maintained until the end of 2029.
The IMF’s projections indicate that Kenya’s GDP reached an estimated $108.9 billion (Ksh15.14 trillion) in 2023, compared to $113.7 billion (Ksh13.37 trillion) in 2022. However, the growth rate is estimated to have slowed down to 5.5% in 2023, likely due to the combined effects of drought and global financial constraints caused by the war in Ukraine.
