Business

The International Monetary Fund has released Sh4 billion ($56.8 million) to Kenya, ending a two-year embargo on the country for failing to meet key conditions for aid.

It also extended the deadline for its Poverty Reduction Growth Facility programme in Kenya to November 20.

The programme was to expire on April 30, and the extension will give the parties time to complete the third review on country’s performance under a three-year Poverty Reduction and Growth Facility. However in unlocking funding for Kenya, the Fund (IMF) overlooked some of its key demands on the Government. The money is the first Kenya has received since early 2005, when relations with the Fund soured on allegation of corruption in Government, especially after the Anglo-Leasing contracts.

The disbursement brings the total payments under the poverty reduction programme in Kenya to nearly Sh12 billion ($170.4 million). The IMF Board sidestepped five performance criteria, said Mr Murillo Portugal, deputy managing director and chair of the IMF, in a statement posted on the fund’s web site.

The loan comes two weeks after the World Bank’s board also changed its position on lending to the country, and made Kenya the first country to have its Country Assistance Strategy updated. The announcement was accompanied by a pledge of Sh10.8 billion in project financing most of which will go to fund projects in Western Kenya.

However, the IMF insisted that there had been progress in its demand that ministers, permanent secretaries and heads of State firms declare their wealth was the basis for the waiver. “That process is ongoing, and the Government is in the process of laying before the parliament an amendment of the Act that we think will enhance transparency on wealth declaration,” noted IMF resident representative, W. Scott Rogers yesterday. “It was on that basis that the board decided to waiver that condition.”

Also waived was a demand that the Government remove controls on banks’ fees and charges by repealing Section 44 of the Banking Act, which requires banks to seek approval of the Central Bank of Kenya before increasing fees and charges. “Recent efforts to allow greater interest rate flexibility and the enactment of the Banking Amendment Bill are welcome steps,” the IMF said. However, more reforms are needed, including sale of government shares in KCB and National Bank of Kenya and passage of the Anti-Money Laundering Bill.

It also insists that the Banking Act be amended “to align Kenya’s legal and regulatory framework with best international practices.” IMF resident representative W. Scott Rogers at the Press conference yesterday.