The International Monetary Fund has approved a $209 million emergency loan to Kenya. The loan is intended to help the country deal with the effects of high prices, drought, and the lingering damage from political unrest last year.
Facing a budget deficit this year of over $1.5 billion, and a balance of payments deficit of nearly $700 million, Kenya had requested the maximum loan allowed under the International Monetary Fund's Exogenous Shocks Facility, a program designed to help low-income countries cope with the effects of the global financial crisis.
Finance Minister Uhuru Kenyatta welcomed the loan's approval.
"The executive board of the IMF met yesterday and approved the request, and as a result Kenya is now going to receive about $209 million immediately," he said. "The support is an indication of the confidence the IMF has in our sound macroeconomic management."
The IMF said it approved the loan in response to the impact on Kenya's economy of high prices for food - particularly corn, a staple crop - fuel, and fertilizer, along with a decline in demand for Kenyan goods and services as a result of the global economic downturn.
Kenya's economy had averaged six percent growth from 2004 to 2007, and was expected to grow at an even faster rate in subsequent years. But the economy took a severe hit from political and ethnic violence that followed a disputed presidential election in December 2007.
Economic recovery has been hampered by continued high prices, and a lower demand for Kenyan exports like tea and coffee, fewer tourists, and lower remittances from Kenyans living abroad. Low rainfall has also left some 10 million people without food security, according to the United Nations. Inflation has risen, and the Kenyan shilling has depreciated. GDP growth in 2008 was less than two percent and is estimated at about 3 percent for this year.
The IMF said the loan will hopefully make it easier for Kenya to secure more loans from other donors.
The IMF has also provided a political boost to Kenyatta, who is also Kenya's deputy prime minister, and who has come under fire in recent weeks for supposed discrepancies in the government's budget. The anti-corruption organization Mars Group had highlighted errors in the budget presented to parliament last month of some $130 million.
Kenyatta said a printing error was responsible and submitted a revised budget. This week lawmakers signed off on the new figures, but Mars Group says there are still widespread errors.
But speaking at the announcement of the loan, the IMF's senior representative in Kenya, Scott Rogers, said the problem appeared to be caused by budget codes for some items being left out of a database, which led to printing errors, and that the new budget appeared to be accurate.
"When the errors contained in the first printed supplementary estimates emerged, the ministry called me in to have a look at their database and talk with their staff and budget supplies to see if we could find out the origin of the problem," he said. "When those codes were correctly put in and the estimates reprinted as far as we can tell the errors went away."
Kenyatta had come under pressure to resign over the incident. Kenyatta took over as finance minister in January, after his successor, Amos Kimunya stepped down over a corruption scandal involving the sale of a Nairobi luxury hotel. Kimunya has since been reappointed to the Cabinet as trade minister.