It said the funding will be under its Extended Fund Facility and Extended Credit Facility arrangements and will be subject to its management approval and Executive Board consideration in the coming weeks.
"The program will support the next phase of the country's COVID-19 response and the authorities' plans for a strong multi-year effort to stabilise and begin reducing debt levels relative to GDP," the IMF said in a statement.
The fund said it also forecast Kenya's economic growth to rebound to 7.6% in 2021, from a contraction of 0.1% last year, helped by school re-openings and the removal of coronavirus restrictions.
For nearly two years, Kenya has abandoned expensive commercial debt to cut back on ballooning repayments, while revenue collection has been squeezed by the pandemic.
It also faces huge budget deficits that have been deepened by the coronavirus crisis.
"Markets will be encouraged by this development as it creates an anchor for Kenya's fiscal consolidation process," said Razia Khan, head of research for Africa at Standard Chartered in London, adding that for now any fiscal consolidation will be 'eventual'.
"Perhaps most significantly, the IMF programme - once approved by the Executive Board - will aim to stabilise debt through the achievement of a primary fiscal surplus."
Last week, the finance ministry said Kenya had to raise its debt ceiling of 9.0 trillion shillings to accommodate fiscal deficits in the coming financial years.
Total debt stood at 7.3 trillion shillings at the end of last year, equivalent to 65.6% of GDP.
(Reporting by George Obulutsa; Editing by Giles Elgood)
By George Obulutsa
