IMF disburses Sh6bn to Kenya to curb forex swings

Thursday 30 June 2011

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The International Monetary Fund (IMF) has announced the release of about Sh6 billion ($65 million) to Kenya in an emergency-style response to the country’s forex crisis after endorsing progress on reforms.
The weakness of Kenya shilling is blamed for increasingly contributing to inflation that rose for the eighth consecutive month to 14.49 per cent in June.
As the markets opened early on Thursday, the shilling was stronger at Sh89.86 to the dollar, after having remained at above Sh90 to the greenback for the better of the last two weeks. IMF made the announcement at 1.20 am Kenyan time.
The cash goes into CBK’s forex reserves which has been reduced by $41 million in the past few weeks to $3.957 billion as at June 24. Thus the disbursement raises the reserves to $4.024 billion – only $26 million more than was the case as at June 10. The huge depreciation to above Sh90 to the dollar began on June 17.
The release of the cash following a review of the economic developments in May this year brings the total given under the Extended Credit Facility (ECF) to $163 million out of about $509 million loan agreed on at the end of 2010.
“The completion of the review enables the disbursement of SDR 43.424 million (about $65 million), which will brings total disbursements under the arrangement to SDR 108.56 million (about US$163 million),” said the IMF.
The Bretton Woods institution said that the executive board’s decision was taken on “a lapse of time basis”, its jargon meaning that it was done without convening a formal meeting which was scheduled to happen later in July.
“Kenya’s economic reform programme is off to a good start. Economic activity rebounded in 2010 with GDP growth of 5.6 percent, driven by strong agricultural production and a dynamic private sector. The growth was broad-based and the sharing of its benefits was supported by policies to promote financial inclusion,” said the release.

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