IMF approves $209 million for Kenya

• Source: Xinhua
• [09:00 May 31 2009]
• Comments

The International Monetary Fund (IMF) has approved a $209 million loan for Kenya to help the country recover from the negative impact of higher food and international fuel and fertilizer costs.

A statement from the IMF said the Bretton Wood institution's loan under the Fund's Exogenous Shocks Facility (ESF) will also aid the east African nation push to secure funding from donor countries and also help in the recovery of the slowdown in external demand associated with the global financial crisis.

"Kenya's strong economic performance in recent years has been stalled by a series of exogenous shocks -- drought, increases in international food, fuel and fertilizer prices, and the global downturn. These shocks have slowed economic growth, raised inflation, weakened the currency, and resulted in the loss of international reserves," IMF's First Deputy MDJohn Lipsky said in a statement on Saturday.

"The authorities have responded to the shocks swiftly. Monetary policy has been eased to support economic activity; and fiscal policy has been accommodating without endangering debt sustainability," Lipsky said.

He added structural policies have focused on improving the food distribution mechanism for better access to staples, as well as on measures to strengthen the banking system.   

"Nonetheless, there are significant risks arising from rainfall dependency, a deeper and more prolonged global downturn, and the domestic political situation. Economic policies should stand ready to respond if necessary to ensure fiscal sustainability and price stability," he said.

The disbursement was approved late Friday under the rapid-access component of the ESF, a facility designed to provide policy support and financial assistance to low-income countries facing exogenous but temporary shocks.

It is available to countries eligible for the Poverty Reduction and Growth Facility (PRGF) -- the IMF's main instrument for financial assistance to low-income countries -- but that do not have a PRGF-supported program in place.

"In support of the authorities' policies, the IMF's Executive Board has approved Kenya's request for disbursement under the Rapid-Access Component of the Exogenous Shocks Facility. Fund support will enable Kenya to close its financing gap while improving the prospects for additional donor support," Lipsky said.