Kenya’s economic resilience: World Bank support and IMF funds bolster reform efforts.

  • 3 Jun 2024
  • 3 Mins Read
  • 〜 by Anne Ndungu


The International Monetary Fund (IMF) has several facilities to assist countries.  The Extended Fund Facility assists countries with serious long-term economic problems such as Balance of Payments problems where more money is going out than coming in, and the government is struggling to pay for imports due to less foreign exchange. These kinds of issues take time to fix and indicate deep-rooted economic problems. 

The IMF steps in with the EFF to help countries using medium-term reforms on condition that countries undertake structural reforms to address the underlying issues. Financial support is therefore given in tranches based on meeting certain performance criteria. Regular reviews are also undertaken to assess progress and make the necessary adjustments. The program duration can be three to four years with a repayment period of 4.5 to 10 years, and the interest rate is pegged at market rates.

The Extended Credit Facility (ECF), on the other hand, is for Low-Income Countries eligible under the Poverty Reduction and Growth Trust (PRGT) to help them stabilise their economy, address poverty, and attain sustainable development. The review is done every six months for a program duration of 3.5 to five years. The interest rate is zero. 

The Resilience and Sustainability Facility program also provides long-term loans to countries to address problems such as climate change and pandemics. Middle-income countries with a per capita income below a specific threshold qualify for this loan. Loans are repaid over 20 years with a grace period of 10.5 years. Interest rates depend on the country’s income and other factors. The IMF Executive Board approved SDR 407.1 million under the Resilience and Sustainability Facility (RSF) on July 17, 2023, for Kenya to work on climate change efforts. 

Kenya’s EFF/ECF arrangements were approved by the IMF board in April 2021 for 38 months and extended for 10 months in July 2023 to give more time for reforms. The initial amount approved was SDR 1.655 billion (about US$2.34 billion), but in January 2024, additional funding of about $941 million was approved in January 2024, bringing the total IMF support to about $3.9 billion. The aim was to help Kenya recover from the impact of COVID-19, lower debt by gradually increasing tax revenues and prioritising revenues in essential areas and build up financial reserves to handle shocks and improve the balance of payments. Other challenges include tackling inflation, climate change, strengthening the currency and addressing the widening gap between the wealthy and the poor. The special reforms to be undertaken were: 

  • Addressing Tax and Spending by increasing taxes and prioritising spending on essentials
  • Reforming State Owned Enterprises to make them more efficient and less of a financial burden
  • Enhancing Anti Corruption and Financial Controls to combat money laundering and terrorism financing
  • Improving Central Bank Efficiency by making the overall system more efficient and reliable

During the 6th IMF review, the IMF noted Kenya’s good performance. The aim is to strengthen Kenya’s fiscal and debt situation, stabilise inflation, increase the Central Bank’s foreign currency reserves and address governance issues. 

However, the IMF also noted that Kenya needed financial support due to the materialising Euro bond in June 2024. While the bond could be rolled over at a reasonable cost, current global market conditions made it unlikely. The IMF staff team noted that the government had managed the FY 2022/2023 budget prudently to bridge the budget deficit and lower Kenya’s debt. 

The 7th review, however, was prolonged by the IMF assessment of the impact of the recent floods alongside the usual reviews. The Cabinet Secretary of the National Treasury on 30th May 2024 informed Parliament that it expects to receive KES 131.5 billion (about US $992.48 million) from the International Monetary Fund (IMF) in the largest disbursement ever since the program began, which signifies confidence in the Kenyan economy. In addition, the World Bank Executive Board also met on 30th May 2024 and approved a disbursement of US$1.2 through Development Policy Operation (DPO) VI. The key commitment seems to be the move towards a Treasury Single Account. Other Commitments under this disbursement include: 

  • Switching to online procurement by 2027
  • Cutting government spending on salaries from 47% of total government revenue in 2023 to 35% by 2027
  • Reducing pollution from transportation by lowering traffic emissions to 15.5 MtCO2 by 2027
  • Investing in environmental protection by setting aside $750 million for the project
  • Ensuring transparency in government by ensuring government officials are transparent about personal interests. This will be done through an independent agency, and the aim is to increase the figure of officials who declare their interests by 85% 
  • Expanding higher education by raising enrollment from 362,834 students in 2023 to 500,226 students by 2027
  • Boosting online business by growing revenue from e-commerce from $3.6 billion in 2023 to $5.7 billion by 2027

It is hoped that Kenya can forge a path towards stability, sustainability, and inclusive growth through rigorous reforms and strategic investments, demonstrating resilience in the face of adversity.