Kenya to receive emergency cushion from IMF

by Elayne Wangalwa 0

The country will receive 700 to 750 million US dollars standby loan to aid in responding to looming shocks.

“Fiscal policy will aim at preserving debt sustainability while providing room for the execution of the Standard Gauge Railway project. To accommodate additional investment spending, the government is committed to containing the wage bill over the medium term,” said Mauro Mecagni, assistant director of the IMF’s African department, in a statement.

The construction of a Standard Gauge Railways (SGR) is one of the six critical thematic areas of the full year 2014/15 budget in order to further fortify the platform for accelerated inclusive growth. The SGR is expected to improve Kenya’s productivity and competitiveness in the domestic and international markets.

Last month, the IMF noted that, “Kenya’s medium-term growth prospects are favorable, supported by rising infrastructure investment in energy and transportation; the expansion of the East African Community market; deepening financial inclusion, which fosters a more dynamic small and medium-sized enterprise sector; and the positive impact of large-size irrigation projects on agricultural productivity.”

Nonetheless, the country still faces challenges of insecurity which has led to a decline in tourism numbers, weather related shocks, slow growth in some sectors and difficulties in implementing devolution.

In January, East Africa’s biggest economy requested for an emergency loan in order to respond to looming economic shocks.

The East African country’s taking of the precautionary loaning arrangement is part of the measures the government is undertaking to avert a repetition of the shocks that hit its economy less than three years ago.

In 2011, the country’s central bank was unable to tackle internal and external shocks shaking the economy and pushing the currency to its highest mark of 107 Kenyan shillings against the dollar.

Last year, Kenya received its last installment of a three-year, 750 million US dollar loan.