The International Monetary Fund has approved a request by Kenya to extend by six months a stand-by agreement that was due to expire at the end of March, giving it time to finish mandatory reviews, the IMF said in a statement.
The stand-by agreement, which was approved in March 2016, was for $989.8 million, alongside a stand-by credit facility of about $494.9 million.
“On March 12, 2018, the Executive Board of the International Monetary Fund approved Kenyan authorities’ request for a six-month extension of the country’s Stand-By Arrangement to allow additional time to complete the outstanding reviews,” the IMF said in a statement late on Tuesday.
Last week the IMF said that stand-by credit facility arrangements cannot be extended beyond 24 months.
It said the reviews were expected to be completed by September, allowing access to the funds available in the stand-by agreement.
“In support of this request, the authorities have committed to policies that will enable them to achieve the program objectives, including reducing the fiscal deficit and substantially modifying interest controls,” IMF said.
The government adopted a cap on commercial lending rates in September 2016, setting it at 4 percentage points above the central bank’s benchmark rate, to limit the cost of borrowing from commercial banks. It said lenders had failed to pass on the benefits of growth in the industry to consumers.
Earlier this month, the Finance Minister Henry Rotich said it was a good time to revisit the cap, while the chair of the parliament’s influential budget committee has also said there was a case for altering it.
The IMF said last month that Kenya had lost access to the funds meant to cushion it against unforeseen external shocks last June, due to failure to complete a review of the programme.
Kenya asked the IMF for the extension last week.
Reporting by George Obulutsa; Editing by Eric Meijer