Kenya, IMF loan third tranche to delay to mid-July

National Treasury Principal Secretary Julius Muia

By Business Daily Africa

Kenya will get the new tranche of Sh28 billion from the International Monetary Fund (IMF) in the new financial year, a delay that could complicate the funding of the budget in an election year.

Treasury Principal Secretary Julius Muia said the money, which is the third tranche under the IMF programme, is expected in the new financial year that starts Friday, with the IMF giving indications the money may be wired by mid-July.

IMF reached a staff-level agreement with Kenyan officials on April 25 pending a board approval for the release of the funds.

Kenya is not listed in the current IMF Board calendar that runs through July 8, with the Treasury admitting the delays will push back the reception of the funds.

Kenya planned to finance the Sh944.7 billion budget gap by raising Sh664 billion domestically and Sh280.7 billion abroad but has struggled in securing dollar loans including a failed bid to tap the Eurobond.

“We are in a very good working relationship with the IMF and our programme is going very well. Ok, there is a delay of about a week or two that tranche will come very early next financial year,” Mr Muia said.

The IMF said Kenya is on track to meet its fiscal objective under the program, and strong tax performance this year is supporting resilience in the face of global shocks.

The Funds said as indicated in April, completion of the review would allow Kenya to access SDR179.13 million (approximately $239 million at current exchange rates) by mid-July.

“The third reviews of Kenya’s EFF/ECF arrangements are progressing well and a meeting of the IMF Board to complete the review is expected in mid-July,” said an IMF spokesperson in response to Business Daily queries.

Kenya is facing very high refinancing costs for dollar loans as it seeks to tap global markets to plug the country’s budget deficit.

Churchill Ogutu – Economist IC Group says Treasury had banked on Sh57.5 billion as cumulative disbursements by the IMF this financial year after the second and third reviews but has only received Sh31 billion after the second review.

The country was also forced to cancel the issuance of $1 billion Eurobond after the National Treasury received bids priced at 12 per cent.

Treasury Cabinet Secretary Ukur Yatani said Eurobonds had become very expensive in the wake of Russia’s invasion of Ukraine that forced Kenya to reconsider issuing a bond.

The country will now return to syndicated loans last done in 2019 by ousted Treasury CS Henry Rotich before the government changed its borrowing policy away from commercial banks to reduce the cost of debt and lengthen maturity to ease the payment burden.

Treasury says it is yet to lock in the funds but remains positive about securing a dollar loan before the end of the financial year.

“We are just out there in the market we know we will get our money in good time so I do not want to commit ourselves about the date but we are out there and the prospects are very good,” Mr Muia said.

Kenya has turned aggressively to the domestic market to issue local bonds to plug the deficit.

Treasury has borrowed Sh597 billion as at June 27 which is still behind the local borrowing target of Sh664 billion.