(Updates with fiscal consolidation plans)
By Duncan Miriri
NAIROBI, March 8 (Reuters) - Kenya has asked the International Monetary Fund (IMF) to extend its $1.5 billion standby credit facility that expires in March for a further six months, the IMF said.
The IMF said last month that Kenya had already lost access to the funds meant to cushion it against unforeseen external shocks last June because of a failure to complete a review of the programme.
In a statement issued on Wednesday at the end of an assessment mission to Nairobi, the IMF said the request for an extension would be put to the board before the facility expires on March 13.
The Washington-based IMF said the government had committed to reduce the fiscal deficit and substantially modify interest controls, imposed on banks in 2016, which have been partly blamed for choking private sector credit growth.
“Discussions on the details of these policies will continue in the coming weeks,” the IMF said in a statement, adding a full review of the two-year programme was expected to be completed in September.
The restoration of access to an extended facility would still be subject to the completion of the full review, the fund said on Thursday.
Both sides had agreed the fiscal deficit would be reduced to 7.2 percent of GDP in the 2017/18 (July-June) fiscal year, from 8.8 percent in the prior further, and to 5.7 percent in 2018/19, the IMF said, broadly in line with the plan published by the finance ministry before the talks started.
“This will be achieved by a combination of revenue measures and contained spending,” the IMF said.
It said Kenya’s economic growth was expected to rise to 5.5 percent this year, after elections and drought depressed output to an estimated 4.8 percent last year.
“Annual growth could rise further to 6.5 percent within a couple of years, provided that the authorities continue economic reforms, including reducing the fiscal deficit and amending interest rate controls,” the IMF said.
Finance ministry officials have told local media they want to introduce a consumer protection law to parliament this year to modify the rate caps, while a senior lawmaker told Reuters last month the most likely modification was the removal of a floor on deposit rates.
The caps compelled lenders not to charge their customers more than 400 basis points above the central bank rate, which stands at 10 percent now, and to offer a minimum deposit rate of 70 percent of the central bank rate. (Editing by Toby Chopra)