IMF revises Kenya’s 2021 economic growth forecast to 7.6%

KENYA – The International Monetary Fund (IMF) has revised Kenya’s 2021 economic growth forecast upwards from 4.7% to 7.6% after reaching a financing agreement with Kenyan government.

In February 16, 2021, IMF revealed that it had reached a US$2.4 billion financing agreement with Kenya to support the country’s Covid-19 response and to reduce the level of debt relative to the GDP.

The IMF program is based on revenue-led fiscal consolidation and strong economic growth.

East Africa’s largest economy expects a steady increase in tax revenue from the main tax revenue streams: income tax, value-added tax, import duty, and excise duty as the economy slowly returns to pre-Covid-19 growth levels.

“Kenya plans to issue US$1.13 billion Eurobond before the end of the fiscal year ending in June 2021, and US$1.14 billion Eurobond in the coming financial year 2021/22”

However, some financial analysts do not share IMF’s highly optimistic outlook on Kenya’s GDP growth, describe the IMF’s forecast as extremely aggressive and expect Kenya’s economy to expand at 4.9% in 2021.

Kenya’s 2021 Budget Policy Statement shows that the country plans to issue US$1.13 billion Eurobond before the end of the fiscal year ending in June 2021, and US$1.14 billion Eurobond in the coming financial year 2021/22.

Additionally, Kenya’s National Treasury intends to use external re-financing options of US$2 billion in the current financial year ending in June 2021 and US$3.2 billion in the next financial year.

According to Citi Research, a subsidiary of Citigroup Global Markets Limited, the Central Bank of Kenya may be one of the first central banks in Africa to raise its monetary policy rate in 2021 as the country aims to increase domestic debt issuance.

The move will “act as a potential barometer for the potential policy response of other central banks across the continent,” said Citi.

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