International Monetary Fund grants Kenya six month extension of standby facility loan

Central Bank of Kenya headquarters in Nairobi  FILE

Central Bank of Kenya headquarters in Nairobi FILE

In a statement the fund's executive board approved the request to allow for more time to complete the outstanding reviews.

Completion of the reviews will enable Kenya access the funds available under the precautionary arrangement.

"In support of their request, the Kenyan authorities had committed to policies that will enable them to achieve the programme objectives, including reducing the fiscal deficit and substantially modifying interest rate controls", the International Monetary Fund said in a statement issued in Nairobi on Wednesday.

The credit facility will help cushion the country in the event of any external shocks, such as a sudden rise in the price of oil or strengthening of the USA dollar.

According to the global credit rating agency, the fiscal outlook is weakening with a rise in debt levels and deterioration in debt affordability that Moody's expects to continue.

The government adopted a cap on commercial lending rates in September 2016, setting it at 4 percentage points above the central bank's benchmark rate, to limit the cost of borrowing from commercial banks.

Earlier this month, the Finance Minister Henry Rotich said it was a good time to revisit the cap, while the chair of the parliament's influential budget committee has also said there was a case for altering it.