WASHINGTON – The International Monetary Fund [IMF] days ago approved US$ 271 million loan to Burundi under Extended Credit Facility [ECF] arrangement, with US$ 62.6mln ready for disbursement immediately.
According to the IMF, the loan will help Burundi address its protracted balance of payments needs, reduce debt vulnerabilities, and cope with the effects of recent domestic and external shocks, further noting that the country’s post-Covid-19 economic recovery has slowed down, although still healthy.
Commenting about the loan, Kenji Okamura, the IMF deputy managing director, and acting chair said: “Burundi has recently been hit by several shocks. “Spillovers from Russia’s war in Ukraine have triggered commodity price increases, which led to heightened domestic inflation pressures and slowed the post Covid-19 growth recovery.”
He said domestic shocks, including unfavorable weather conditions and an animal sanitary crisis, have hampered primary sector prospects and living conditions. “The country faces important macroeconomic challenges, including persistently high inflation, external imbalances with a widening current account deficit and inadequate foreign exchange reserve coverage, and large fiscal needs and public debt.”
Under the ECF arrangement, the authorities in Burundi will recalibrate the country’s macroeconomic policy mix. They plan to restore external sustainability with the unification of the official and parallel exchange rate markets and foreign exchange market liberalization while being attuned to financial sector vulnerabilities.
They will also strengthen debt sustainability and achieve a better-quality fiscal consolidation path through higher domestic revenue mobilisation, scaled-up investment, better-targeted spending, and prudent borrowing.
“Monetary policy tightening, while modernising the monetary policy framework and exiting monetary financing, will support the ongoing exchange rate unification and contain inflation. Governance and growth-enhancing reforms, as well as timely capacity development will support the program objectives. The arrangement is expected to catalyze donor funding, which is essential to cater to Burundi’s large financing needs and support its exit from fragility, said Okamura
IMF also days ago completed the fifth reviews under the Extended Fund Facility [EFF] and the ECF arrangements for Kenya, allowing the disbursement of US$415.4mln, bringing total disbursements to the country under the arrangements so far to about US$ 2.04 billion.
The IMF also approved Kenya’s request for an arrangement under the Resilience and Sustainability Facility of about US$ 551.4mln to support the country’s ambitious efforts to build resilience to climate change.
Antoinette Sayeh, deputy managing airector and Acting chair, stated: “Kenya’s economy has been resilient despite the worst drought in many decades and a difficult external environment. The ECF and EFF arrangements continue to support the authorities’ efforts to address emerging challenges to sustain macroeconomic stability and market confidence, promote growth, and advance ongoing reforms.”
Sayeh said while the medium-term outlook remains positive for Kenya in the near-term global headwinds continue to have a bearing on economic activity, amid elevated inflationary pressures. “The authorities’ commitment to robust policies to sustain reforms that promote resilient and inclusive growth will support Kenya’s positive medium-term prospects,” she said.
She said the approval of the financial year 2023/24 budget and 2023 Finance Act are crucial steps to support ongoing consolidation efforts to reduce debt vulnerabilities while protecting social and development expenditures.
However, she said, recent challenges in resource mobilization and elevated uncertainty call for contingency plans that can be quickly deployed to ringfence fiscal performance going forward. “Tighter financing conditions also require a prudent debt policy and continued efforts to prioritize concessional loans.”
The Central Bank of Kenya’s [CBK] commitment to a data-dependent policy stance is essential to keep inflation expectations anchored, the IMF official added.
She urged CBK to continue taking appropriate steps to strengthen its reserves position and deepen the foreign exchange market, while allowing exchange rate flexibility as a shock absorber.
“Sustaining the momentum in the structural reform agenda will require prioritizing strengthening public financial management systems; management of fiscal risks from state-owned enterprises…including by enhancing their governance and oversight and ensuring effective expenditure audits for transparency and accountability.
“The reforms under the RSF program are expected to advance Kenya’s already strong track-record at addressing climate-related challenges. These reforms will advance efforts to incorporate climate risks into fiscal planning and the investment framework, reduce emissions through carbon pricing, enhance Kenya’s existing frameworks to mobilize climate finance; and strengthen disaster risk reduction and management.”
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