NAIROBI: The International Monetary Fund said it has reached a staff-level agreement with Kenya that would provide the cash-strapped government with access to another $1 billion in credit.

Kenya is labouring under a public debt mountain of $70 billion but its loan repayments have jumped as the local shilling slumped to all-time lows against the dollar.

In a bid to ease the pressure on its finances, the government of President William Ruto has drawn up a 3.6-trillion-shilling ($26.2 billion) budget for 2023/24 with proposed new taxes expected to generate 289 billion shillings.

IMF staff, Kenya reach agreement on economic programmes

The IMF deal, which is subject to approval by its board in July, follows a mission by a team from the international lender to the country earlier this month.

The IMF said in a statement issued on Tuesday that its total commitments to Kenya would increase to $3.52 billion from $2.43 billion previously agreed in April 2021.

If approved in July, Kenya would have immediate access to $410 million, it said.

Kenya has been grappling with a cost-of-living crisis, a punishing drought and the decline in the value of the shilling, and saw economic growth slow to 4.8 percent last year from 7.6 percent in 2021.

“The government budget has been under pressure from shortfalls in revenue collection and challenging financing conditions,” the IMF said.

The agency urged the government to reform state-owned enterprises such as loss-making national carrier Kenya Airways and utility company Kenya Power.

Ruto’s government is aiming to reduce its budget deficit in part by introducing taxes on a range of goods including beauty products, gambling and various foodstuffs and fuel, measures criticised by the opposition for punishing ordinary Kenyans.

While the IMF said it had a favourable medium-term outlook for the Kenyan economy, “significant challenges remain against the backdrop of slow global economic growth and tight financial conditions”.