NAIROBI (Bloomberg) — The International Monetary Fund approved Kenya’s request for a six-month extension to a $1.5-billion standby facility to allow the nation time to complete reviews of the lender-supported program.
The government requested an extension to the facility in order to complete the delayed reviews, before embarking on talks about a new potential program. The current agreement comprises a $990 million arrangement repayable with interest over five years, and a $495 million, interest-free credit repayable over eight years.
“Completion of the reviews will enable the Kenyan authorities to have access to funds available under the precautionary” stand-by arrangement, the fund said in a statement on Tuesday. “The reviews are expected to be completed by September 2018.”
The IMF withdrew access to the standby facility in June after the government failed to meet budget-deficit targets, due to higher than planned expenditure caused by a drought and protracted elections. Despite that withdrawal, the Kenyan central bank’s Monetary Policy Committee continued to say the country had access to the funds.
The funds, approved by the IMF in March 2016, were accessible to Kenya if it faced “exogenous shocks” that led to a balance-of-payments crisis.
The National Treasury projects a budget deficit of 7.2 percent of gross domestic product in the fiscal year through June and plans to narrow it to 5.6 percent in the following year and 3 percent by 2022. The Treasury is preparing a supplementary budget that’ll reduce this fiscal year’s spending as revenue collection falls below the target, Treasury Secretary Henry Rotich said earlier this month.