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© Reuters. FILE PHOTO: The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S., September 4, 2018. REUTERS/Yuri Gripas/File Photo By Duncan Miriri and George Obulutsa

NAIROBI (Reuters) -The International Monetary Fund has agreed to increase Kenya’s lending programme by $650 million, the Kenyan president’s chief economic adviser said on Tuesday.

Sovereign debt investors are paying close attention to the East African nation due to a $2 billion Eurobond that is maturing next June, amid persistent weakness in its foreign exchange rate that is weighing on Kenya’s hard currency reserves.

“As of now the 2024 Eurobond is fully funded. The refinancing is fully funded,” David Ndii, the adviser, told an economic forum hosted by a local commercial bank.

“It (IMF) can augment our programme as of now up to $650 million, that they have agreed to do,” Ndii said.

The government plans to buy back up to a quarter of the bond this year, the governor of the central bank Kamau Thugge told Reuters last month, to be financed by new borrowing.

An IMF team arrived in Nairobi last week to conduct the sixth review of a lending programme approved in 2021. The fund has not yet commented on the outcome of the mission, which is yet to be completed.

However, the weakening of the shilling is likely to maintain pressure on government finances, said ratings agency Fitch in a statement issued on Tuesday.

“There remains a significant risk of further fiscal slippage, particularly if the exchange rate weakens further,” Fitch said.

The Washington-based Fund has been criticised by some Kenyans on social media for supporting government policies they blame for a worsening cost of living crisis.

Such policies include an increase in direct and indirect individual taxes from July.

Ndii defended the role of the IMF in the management of the economy.

“Without the IMF programme we would probably default,” he said, adding that they also have the option of accessing the IMF’s exceptional access window, which is used by nations in acute need of balance of payments support.

Kenya’s international bonds traded flat to a touch lower, as markets awaited confirmation of Ndii’s remarks about the increase in IMF funding.

“It is definitely a positive sign. If it is followed quickly by an IMF statement, it will be more reassuring,” said a senior trader at a Nairobi commercial bank.