The International Monetary Fund (IMF) has approved the dispersal of $ 110.5 million to Kenya, following a positive review of the country’s economic climate.
The pay-out comes as part of an agreed three-year Extended Credit Facility (ECF), which has the potential to see the IMF provide funding to the East African country of as much as $750.6 million.
The ECF was agreed on January 31st 2011 for a total facility amount of $500.4 million, which was increased some months later in December 2011 to the current total facility figure.
The IMF on Wednesday completed its fourth review of Kenya’s economic arena, and based on its findings granted approval for the draw-down of the $110.5 million.
“Economic activity in Kenya is rebounding after slowing down in 2011/12, helped by improved macroeconomic stability, foreign investment in oil and natural gas exploitation, and favorable weather conditions,” said Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair of the IMF’s Executive Board in a statement.
He added: “Inflation has declined substantially, net international reserves have increased, public debt is low, and pressures on the exchange rate have dissipated. Kenya has also made progress in reducing its economic vulnerabilities.”
Shinohara also praised the country’s Central Bank, for having maintained strict policies intent on facilitating a turn-up for the Kenyan economy. He said: “The Central Bank of Kenya’s tight monetary policy stance has helped bring inflation down. Given low inflation expectations, the Central Bank cut its policy rate recently, and there may be scope for further monetary easing if economic conditions warrant.”
However, Kenya does still face certain challenges in its road to economic stability, with the IMF expressing concerns in particular with regard to the up-coming elections billed for early 2013 – the first since the country experience wide-spread civil violence following the 2007 presidential elections.
The IMF also noted that there may be possible side-effects of the global economic slow-down, with Shinohara saying: “Looking forward, risks to the program arise from a weakened global financial conditions and rising oil prices, which could derail Kenya’s favorable economic performance. Further efforts to build policy buffers should enhance Kenya’s economic resilience and ensure a sustained and strong economic expansion.”
BY; Gabriella Mulligan