Nairobi — The International Monetary Fund (IMF) has expressed support for the government's tax hikes even as it extended another Sh136.9 billion loan.

In a statement, IMF's Executive Board stated that the new taxes are critical in advancing the government's development agenda.

Deputy Managing Director and Acting Chair Antoinette Sayeh pointed out that the loan extended to Kenya will help cushion the battered economy from the fallout caused by tightened debt market conditions and external shock.

"The approval of the FY2023/24 Budget and 2023 Finance Act are crucial steps to support ongoing consolidation efforts to reduce debt vulnerabilities while protecting social and development expenditures," she stated.

However she indicated that recent challenges in resource mobilization and elevated uncertainty call for contingency plans that can be quickly deployed to ringfence fiscal performance going forward.

"Tighter financing conditions also require a prudent debt policy and continued efforts to prioritize concessional loans."

She further stated that Kenya's economy has been resilient despite the worst drought in many decades and a difficult external environment.

"The ECF and EFF arrangements continue to support the authorities' efforts to address emerging challenges to sustain macroeconomic stability and market confidence, promote growth, and advance ongoing reforms," she said.

She explained that while the medium-term outlook remains positive, in the near-term global headwinds continue to have a bearing on economic activity, amid elevated inflationary pressures.

"The authorities' commitment to robust policies to sustain reforms that promote resilient and inclusive growth will support Kenya's positive medium-term prospects."