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IMF approves 1.5bln USD standby credit facilities for Kenya

Xinhua, March 16, 2016 Adjust font size:

The International Monetary Fund (IMF) has approved 1.5 billion U.S. dollars standby credit facilities for Kenya.

A statement from the IMF said on Tuesday that the deal comprises of 989.8 million dollars two-year Stand-By Arrangement (SBA) and 494.9 million dollars 24-month Standby Credit Facility (SCF) for Kenya.

"Despite positive policy steps undertaken under the current fund-supported program, the economy remains vulnerable to shocks, reflecting less favorable global financial market conditions, as well as continued security threats and potential extreme weather events," Zhu Min, IMF Deputy Managing Director, said in the statement.

He said the new precautionary arrangements would provide a policy anchor for continued macroeconomic and institutional reform, and would help mitigate the impact of potential exogenous shocks if they were to materialize.

IMF said Kenyan authorities have indicated that they will continue to treat both arrangements as precautionary, and do not intend to draw on the new SBA and SCF arrangements unless exogenous shocks lead to an actual balance of payments need.

The East African nation is now entitled to access 757.5 million dollars and the remainder in four tranches upon completion of semi-annual program reviews.

Zhu said Kenyan authorities are taking actions to preserve financial stability, including steps to strengthen micro and macro prudential stress testing and the capital adequacy assessment framework, and to develop a legal and operational crisis management system.

"Continued improvement in the quality of macroeconomic statistics and strengthening the business climate will be key to promoting transparency and evidence-based policy making, and supporting inclusive growth," Zhu said.

The IMF official also said the Central Bank of Kenya is committed to gradually reducing inflation to the mid-point of its target range of below five percent.

"To achieve their inflation objective, the authorities will align the interbank rates with the policy rate, and formally announce and implement an interest corridor, thereby strengthening the monetary policy transmission mechanisms in the context of a floating exchange rate regime," he said. Endit