Kenya has fulfilled all targets mandated by the International Monetary Fund in a review of its loan programme, the country’s central bank governor told Reuters on Wednesday, and expects to continue its engagement with the global lender after April.
Kenya agreed to a four-year loan with the IMF in 2021, and has also signed up for climate change lending, taking its total loan access with the Fund to $3.6 billion.
But deadly protests against planned tax rises forced the government to scupper its planned finance bill in June, leaving the heavily indebted government with a bigger budget deficit for this financial year, mounting unpaid bills, and a delay in disbursement of IMF funding.
“We’ve achieved all that was needed for the reviews to be completed,” Kamau Thugge, the head of the Central Bank of Kenya, told Reuters in an interview on the sidelines of the IMF and World Bank annual meetings in Washington. “Obviously after the review there are still the targets for December.”
A staff level agreement on a combined 7th and 8th review of the country’s programme is scheduled to go the IMF’s executive board for a sign-off on Oct. 30, which will in turn trigger a payout of $611 million.
Asked whether the country was going to request another financing programme with the IMF after the current one runs out in April, Thugge said that would be the base case, though the size and duration were yet to be confirmed.
“It will depend on the balance of payments and needs, it will depend on the ambitiousness of the reforms that we agree,” he said. “But definitely, we will have our relationship going forward with the IMF.”
Speaking about the macroeconomic outlook, Thugge said inflation in Kenya continues to decline and the country had built up more foreign exchange reserves.
Inflation was set to decline below the 3.6% annual rate recorded in September, he said, adding that the country’s FX reserves currently stood at $8.6 billion, representing 4.3 months worth of imports. The central bank had said earlier in October that reserves stood at $8.25 billion.
More interest rate cuts also are on the cards, Thugge said, after policymakers slashed the benchmark lending rate by 75 basis points in October to 12.00%, following a 25-basis-point reduction in August – the first rate cut in approximately four years.
“It’s the desire of everybody for interest rates to come down,” Thugge said.