Kenya says IMF stand-by arrangement over, still engaging with the fund

Reading Time: 3 minutes

Kenya’s stand-by loan deal with the International Monetary Fund has expired but the country will continue to talk to the Fund about what funding facilities it can access in future, Finance Minister Henry Rotich said on Thursday.

Kenya had secured a six-month extension in March of the $989.8 million arrangement, agreed in 2016 to help cushion the economy in case of unforeseen external shocks that could upset the balance of payments. It included a stand-by credit facility of $494.9 million that expired in March.

No funds were ever drawn down.

Rotich told reporters the expiration of the programme was not unusual, since Kenya has had more than a dozen such programmes over the last 15 years that came and went.

“There is nothing unique about any programme ending. I think what’s important is that we did have a very successful two-year programme, which is now coming to an end,” he told reporters after a meeting on the budget.

The shilling weakened by as much as 0.3 percent from Wednesday’s close after news of the expiry of the facility with IMF, forcing the central bank to intervene through the sale of dollars to banks in the afternoon.

Talks with the Washington-based fund were now focusing on the next type of facility the country can secure, Rotich said.

When Reuters contacted its local office, the IMF said it would comment later.

Rotich said East Africa’s biggest economy should wean itself off support from the IMF.

“As a country that is entering into the medium and developed countries, we should be relying less and less on IMF facilities, especially if you have come of age in our macroeconomic management,” he said.

“But we can still engage and get back to it if we feel it is still necessary. We will continue to engage with the fund going forward, the way we have done it in the past.”

The IMF had set conditions for extending the stand-by arrangement, including the repeal of a cap on commercial lending rates which was imposed in 2016.

Rotich tried to repeal the cap in his June budget, but parliament voted to keep the upper limit of the rate cap while getting rid of a minimum deposit rate it had previously imposed.

Kamau Thugge, the principal secretary to the ministry of finance, had earlier told the budget meeting that not having an IMF precautionary arrangement would not hurt the economy.

The economy was expected to grow 6.2 percent in 2019, up from a forecast 6.0 percent this year, Thugge said in a presentation.