IMF to Boost Kenya Program by $650 Million, Says Presidential Adviser

By Duncan Miriri and George Obulutsa

NAIROBI – The International Monetary Fund (IMF) has agreed to expand Kenya’s lending program by $650 million, as announced by the chief economic adviser to the Kenyan president on Tuesday.

Sovereign debt investors have been closely monitoring Kenya, particularly in light of a $2 billion Eurobond maturing next June, amidst ongoing challenges with the country’s foreign exchange rate, which is impacting its hard currency reserves.

"Currently, the 2024 Eurobond is fully funded. The refinancing process is fully funded," stated David Ndii, the economic adviser, during an economic forum organized by a local bank.

"The IMF can augment our program by up to $650 million, which they have agreed to do," Ndii elaborated.

The government is looking to buy back up to a quarter of the Eurobond this year, as mentioned by Kamau Thugge, the governor of the central bank, who indicated this would be financed through new borrowing.

An IMF team arrived in Nairobi last week to conduct the sixth review of a lending program initiated in 2021. The IMF has not yet provided comments on the mission’s outcome, which remains ongoing.

Despite these developments, the continued depreciation of the Kenyan shilling is expected to exert pressure on the government’s finances. Ratings agency Fitch noted in a statement on Tuesday, "There remains a significant risk of further fiscal slippage, especially if the exchange rate weakens further."

Some Kenyans have expressed discontent on social media regarding the IMF’s support for government policies that they believe have contributed to the rising cost of living, including increased direct and indirect taxes starting in July.

In defense of the IMF’s role in economic management, Ndii stated, "Without the IMF program, we would probably default," highlighting the option to access the IMF’s exceptional access window, typically utilized by countries facing acute balance of payments difficulties.

In financial markets, Kenya’s international bonds were trading flat to slightly lower as investors awaited formal confirmation of Ndii’s remarks regarding the increase in IMF funding. A senior trader at a Nairobi commercial bank remarked, "It is definitely a positive sign. If it is followed quickly by an IMF statement, it will be more reassuring."