IMF lending restored

The IMF has approved a three-year credit of some US $198 million to Kenya following a three-year suspension of assistance, after being convinced that Kenya was making progress in battling corruption. The loan would support Kenya’s ongoing economic and structural reform programme, an IMF press release stated. The first annual loan, under the Fund’s Poverty Reduction and Growth Facility (PRGF) - formerly called the Enhanced Structural Adjustment Facility (ESAF) - would be equivalent to US $40 million. The IMF and the World Bank suspended regular concessional lending to Kenya in July 1997 on the grounds of corruption and inefficiency in the government, and had repeatedly rejected Kenyan proposals to renew aid until certain conditions were met.

“The Kenyan authorities have pursued generally cautious macroeconomic policies since early 1998 and have made efforts recently to address weaknesses in the governance area, thereby paving the way for an arrangement under the PRGF,” it said. The government had committed itself to further improvements in these areas, in order to achieve sustained economic growth and allow additional resources for poverty reduction programmes, it added. The IMF was also satisfied with Kenya’s interim Poverty Reduction Strategy Paper (PRSP), a requirement for PRGF funding. Kenya’s structural reform programme focuses on streamlining the public service, reducing the role of government in commercial activities (privatisation), and prioritising public expenditure.