IMF set to approve $ 500M for Kenya's credit facility program

November 25, 2010 11:51 am 

NAIROBI, Nov. 25 — The International Monetary Fund (IMF) said Wednesday it has agreed with Kenya on an economic program running up to December 2013 which will be supported by the 500 million U.S. dollars extended credit facility (ECF).

A statement from the IMF offices in Nairobi said the funds will help the East African nation finance its infrastructure projects and also in the implementation of the new constitution.

"I am pleased to confirm that the mission has reached an agreement in principle with the Kenyan authorities on an economic program through December 2013, to be supported by a SDR 325.7 million (about 500 million dollars) Extended Credit Facility," the statement said.

"The agreement reached with the authorities is subject to approval by the IMF's management and Executive Board, which is scheduled to consider the request for the ECF in January 2011."

The development followed a visit by an IMF mission in Nairobi from Nov. 3 to 18 which discussed economic policies that the Bretton Wood institution could support through the ECF.

"The main goal of the authorities' economic program is to transform Kenya into a dynamic economy by raising growth sustainably," Domenico Fanizza, mission Chief for Kenya, said in the statement.

He said the program focuses on creating fiscal scope for investing in infrastructure and the energy sector, especially geothermal power, which will help Kenya deal with the challenges from global warming.

Fanizza said the program also focuses on spending to implement the new constitution that will help to address the long-standing social and political problems holding back Kenya's high growth potential.

"The program strikes a balance between devoting resources to these purposes and fiscal adjustment. The authorities target a gradual reduction of the fiscal deficit, which should bring the government debt-to-gross domestic product (GDP) ratio below 45 percent by 2013/14," Fanizza said.

"Building on the momentum generated by the new Constitution, the aim is at overhauling Kenya's public financial management system and successfully decentralize fiscal administration," he said.

"Tax policy reforms will seek to simplify the tax code, eliminate income tax exemptions, and revamp the value added tax (VAT)."

According to the statement, Fanizza said monetary policy will focus on containing inflation within the five percent target, maintaining a floating exchange rate regime, and the gradual accumulation of international reserves to reduce Kenya's vulnerability to external shocks.

He said financial sector reforms will further broaden access to financial services, bring down transaction costs, and eventually lower the spreads between deposit and lending rates.

"The authorities are working in parallel with the World Bank to create a better private investment climate and strengthen governance. Taken together, these policies and reforms will create the conditions for the fast and sustained economic growth needed to improve country-wide living conditions." (PNA/Xinhua)

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