Kenya's Economic Hardship Eased with a $938 Million Shot in the Arm from IMF

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The International Monetary Fund (IMF) has agreed to provide Kenya with an additional $938 million loan, which will increase the total funding under the Extended Fund Facility and Extended Credit Facility arrangements to $4.43 billion . This loan comes at a time when Kenya is facing liquidity problems, high public debt, weak currency, and rising costs of living due to the impact of COVID-19, the Ukraine war, drought, and high commodity prices .

Kenya has shown some signs of economic improvement, with a GDP growth of 5.4% in the first half of 2023, and a reduction in its exposure to commercial debt due to the cheaper IMF and World Bank loans . The IMF loan will help Kenya cope with its current economic difficulties and meet its sovereign debt obligations, especially the $2 billion Eurobond due in 2024 .

The IMF board is expected to approve the loan agreement in January 2024, which will give Kenya immediate access to $682 million . This will help Kenya revive its economy and support its recovery efforts.

The sectors that are likely to benefit from this package are agriculture, tourism, energy, and health . Agriculture is vital for Kenya’s economy, as it contributes about 25% of the GDP and employs about 75% of the population. The IMF loan will help Kenya invest in irrigation, mechanization, and crop diversification to boost agricultural productivity and resilience to climate shocks . Tourism is a major source of foreign exchange and employment for Kenya, as it accounts for about 10% of the GDP and 9% of the total workforce. The IMF loan will help Kenya revive the tourism industry, which has been severely affected by the COVID-19 pandemic, by supporting infrastructure development, marketing, and vaccination efforts. Energy is crucial for Kenya’s industrialization and development, as it provides electricity and fuel for various economic activities. The IMF loan will help Kenya expand its renewable energy sources, such as geothermal, wind, and solar, to reduce its dependence on expensive and unreliable fossil fuels. Health is essential for Kenya’s human capital and social welfare, as it affects the quality of life and productivity of the population. The IMF loan will help Kenya strengthen its health system, which has been overwhelmed by the COVID-19 pandemic, by improving access, quality, and affordability of health services.



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