IMF extends Kenya's existing credit facility as new one discussed

Tuesday January 26 2016

International Monetary Fund (IMF) resident representative Armando Morales during the launch of the 2015 Regional Economic Outlook for Sub-Saharan Africa report at The Norfolk Hotel on May 18, 2015. Mr Morales said that IMF has lowered Kenya's 2016 economic growth projection. PHOTO | DIANA NGILA \ NATION MEDIA GROUP

International Monetary Fund (IMF) resident representative Armando Morales during the launch of the 2015 Regional Economic Outlook for Sub-Saharan Africa report at the Norfolk Hotel on May 18, 2015. PHOTO | DIANA NGILA | NATION MEDIA GROUP 

By REUTERS
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Kenya's $680 million standby credit with the International Monetary Fund has been extended to March as both sides work on a new facility with similar features, the IMF's resident representative said.

The East African nation secured the year-long, insurance-type loan in February last year to help it deal with any unforeseen shocks that could threaten economic stability.

"We are now working on extending it for a few weeks just because we are in dialogue with the government to present a new programme to our board before the end of this quarter," Armando Morales told Reuters late on Monday.

"We agreed with the authorities that it was prudent to maintain that insurance during the discussion for the new programme," he said.

The Central Bank of Kenya calmed volatility in the markets last year after hiking its benchmark lending rate by 3 percentage points to 11.50 percent and has increased foreign reserves without turning to the IMF standby loan.

The shilling weakened 11 percent against the dollar last year, less than most frontier currencies, and has been steady this year.

Morales said this showed the government had "the will and the tools necessary" to maintain stability in the economy, strengthening the case for a new standby loan.

The IMF expects Kenya's economy to grow by 6 percent this year, from an estimated 5.6 percent last year, driven by farming, expectations of macroeconomic stability and Kenya's minimal exposure to slowing emerging markets like China.