The International Monetary Fund (IMF) said it had agreed to a $1 billion (927 billion euro) loan for Kenya, an East African country facing liquidity and economic difficulties.
Kenya’s economy is burdened by a debt of $70bn (about €65bn) and a sharp devaluation of its currency, the shilling, against the dollar.
In an attempt to reduce its debt, the government of President William Ruto has prepared a budget including many new taxes that are expected to raise 289 billion shillings (€2 billion) to supplement the 3.6 trillion shillings (€24 billion) budget planned for 2023-24.
This agreement still needs to be validated by the IMF’s executive board which meets in July. If approved, Kenya will have immediate access to $410 million, according to the IMF.
In a statement issued on Tuesday, the financial institution said its commitment to Kenya would be increased to a total of $3.52 billion (€3.2 billion).
Kenya, the economic powerhouse of East Africa with a population of about 53 million, is facing high inflation (+7.9% year-on-year in April) and a historic drought. Growth has plateaued at 4.8% in 2022, far from the 7.6% achieved in 2021.
“The government budget has been under pressure due to shortfalls in revenue collection and difficult financing conditions,” the IMF said.
The financial institution also urged the Kenyan authorities to reform public enterprises, mentioning, in particular, the national electricity provider Kenya Power and the airline Kenya Airways, which recorded record losses in 2022.
The government of President William Ruto, elected in August 2022, intends to reduce the deficit by introducing new taxes, notably on cosmetics, fuel, and gambling.
While the IMF believes that the medium-term outlook for Kenya is favourable, the financial institution stresses that “significant challenges remain in the context of slower global economic growth and difficult financial conditions”.