Kenya confident of new standby facility as IMF visit mends fences

Central Bank of Kenya Governor Patrick Njoroge. FILE PHOTO | NMG 

By OTIATO GUGUYU
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Kenya is confident of getting a new precautionary facility from the International Monetary Fund (IMF) next year after the body met senior government officials this month and agreed to discuss the
facility in a follow up visit set for next year.

Central Bank of Kenya Governor Patrick Njoroge said on Tuesday that IMF’s first visit to the country for almost a year has “opened up their understanding on the economy” in which the key demand by the Bretton Woods institution that the rate cap be removed has been met.

An IMF delegation that was expected in Nairobi in July cancelled the visit after the then Treasury Secretary Henry Rotich and his Principal Secretary Kamau Thugge were charged with corruption offences.

The standby facility is an insurance against foreign exchange shocks.

“We requested them to come when we were in Washington. They hadn’t been here for a whole year. We did not finish anything but it opened up understanding on the economy,” said Dr Njoroge at a briefing on the Monetary Policy Committee meeting.

“They intend to come back next year on our invitation and we made the point that it is in our interest to get that insurance because shocks can be large,” he said.

The IMF staff team, led by Benedict Clements, visited Kenya this month and discussed recent economic developments and the Government’s economic reform plans.

In a communique, the IMF said next year’s meeting will discuss a new precautionary stand-by arrangement and undertake the Article IV consultation discussions.

Kenya’s standby IMF cover for the shilling expired in September last year after the Government failed to secure an extension of a pre-existing $989.8 million (Sh100 billion) arrangement.

Kenya initially secured the two-year IMF precautionary facility in March 2016. It expired in March last year, but was extended up to September.

Kenyan authorities were unable to meet conditions of the multilateral lender — technically called completing a review — because the Treasury was pursuing an expansionary budget that made it hard to cut the fiscal deficit to a set target.

The Government had also failed to deliver on its promise to remove the rate cap on bank loans.