The International Monetary Fund approved $1.5 billion in precautionary funding for Kenya, East Africa’s biggest economy, the Washington-based lender said.
The agreement comprises a $989.8 million so-called standby arrangement and a $494.9 million standby credit facility, both for two years, the IMF said in a statement on its website. Kenya is now entitled to access about $757.5 million of the total, with the remainder available in four portions upon completion of semi-annual reviews, it said.
“Kenyan authorities have indicated that they will continue to treat both arrangements as precautionary,” according to the IMF. They don’t intend to draw on the them “unless exogenous shocks lead to an actual balance of payments need,” it said.
Kenya’s fiscal deficit is expected to reduce by 3 percentage points of gross domestic product over the next two years, the IMF said. The Treasury targets annual economic expansion of 10 percent, accelerating from the current average of 5 percent to 6 percent.
The IMF and Kenya had agreed on a $688 million year-long facility that expired earlier this year to cushion the nation against any exogenous or internal shocks. The country did not draw down on the facility even when its currency depreciated to a low of 106.10 per dollar in September.
“I do not foresee any more shocks till the end of the fiscal year in June,” Kenneth Minjire, a fixed-income Analyst at Stanlib Kenya, said by phone. “An increase in the U.S. Fed rate seems unlikely, and I don’t expect any shocks in oil since supply is increasing and demand is low.”
Internally, Kenya’s tourism sector has been recovering in the past few months and hotels at the country’s Indian Ocean coast were fully booked ahead of the Easter holiday later this month.
Kenya’s central bank projects that the current-account deficit would narrow to 8.8 percent of GDP this year, from 10.4 percent in 2014.