By Matina Stevis
NAIROBI, Kenya—Kenya(Somali Commentator), east Africa’s largest economy, has secured a $1.5 billion loan from the International Monetary Fund, a facility it is allowed to tap only in case of emergency.
The IMF announced late Monday that its board approved the precautionary loan, formally described as “standby,” meaning Kenya won’t use it unless it needs to, unlike many standard bailout loan programs the IMF gives.
The loan is one of the biggest the IMF has granted on the continent as part of a renewed push to help fragile economies here.
It will be available to drawn on if needed for two years, and replaces a similar loan that lapsed this month but, at roughly $750 million, was half the amount of the renewed one.
Kenya is seen as one of the few major African economies surviving relatively well a combined malaise of low commodity prices and a Chinese retrenchment that is affecting some of the continent’s biggest economies. It is a net oil importer and doesn’t rely on Chinese demand for ores or other mineral exports.
Still, its agricultural sector has been affected by extreme weather linked to the El Niño phenomenon, while al Qaeda linked terrorist attacks have taken a big toll on its key tourist industry, a major foreign-exchange earner and once employer of half a million people.
“Despite positive policy steps…the economy remains vulnerable to shocks, reflecting less favorable global financial market conditions, as well as continued security threats and potential extreme weather events,” the Washington, D.C.-based institution said.
“In this context, 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,” it said.
Kenya’s growth rate, at above 5%, is outperforming the average pace of economic expansion in sub-Saharan Africa. But in a report last month the World Bank said the seemingly healthy pace of expansion is led by consumption, not production and in the improvement of individual Kenyans’ prosperity is lagging behind that of many other African peers.
The Kenyan Treasury Secretary Henry Rotich said in late January that he had no intention of drawing on the IMF loan, and said the arrangement was so attractive that other countries were vying to get a similar type of IMF assistance.
In an interview with The Wall Street Journal Mr. Rotich said he was planning to submit a supplementary mid-year budget that would cut spending by $60 million to rein in a gaping deficit, in line with promises made to the fund.