Kenya expects IMF Sh263bn loan approval from next week

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Economy

Kenya expects IMF Sh263bn loan approval from next week


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Dr Patrick Njoroge, Central Bank of Kenya governor. FILE PHOTO | NMG

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Summary

  • The Central Bank of Kenya governor Patrick Njoroge said some $314 million (Sh34.45 billion) were likely to be disbursed after the IMF’s board meeting on Friday.
  • Kenya and the IMF mid-February reached a staff-level agreement for the 38-month credit facility whose disbursement will come in phases.

Kenya expects the first batch of $2.4 billion (Sh263.33 billion) new International Monetary Fund financing programme to be approved and wired next week, giving a boost to government’s response to Covid-19 fight.

The Central Bank of Kenya governor Patrick Njoroge said some $314 million (Sh34.45 billion) were likely to be disbursed after the IMF’s board meeting on Friday.

Kenya and the IMF mid-February reached a staff-level agreement for the 38-month credit facility whose disbursement will come in phases.

“The (IMF) programme is intended to support our Covid-19 response. It will provide direct budget support and also, in terms of other policies, it intends to anchor debt vulnerabilities and reduce them,” Dr Njoroge said.

Kenya had sought the loan from the IMF in December, the second following $739 million (Sh81.08 billion under prevailing exchange rates), received in May last year, which Kenya spent on responding to the economic shocks caused by the first wave of the pandemic.

The fresh cash from the IMF will applied on the second phase of Kenya’s Covid-19 response by filling gaping budgetary deficits as the country battles tumbling revenues as a result of the pandemic’s knocks on economic activity.

“In some sense, the key element of this programme is that it anchors the fiscal consolidation through revenue-driven policies and, thereby, reduces the debt vulnerabilities over the medium term,” Dr Njoroge said.

Kenya’s cash-flow position has been deteriorating in recent months amid rising debt service obligations and falling revenues as businesses and households fight the impact of Covid-19 partial trade shutdowns and travel restrictions on earnings.

Debt servicing costs for the first eight months through February 2021, for example, surpassed recurrent expenditures such as salaries, allowances and government administrative expenses for the first time, signaling the gravity of the country’s worsening fiscal position.

Total debt repayments in the period amounted to Sh638.29 billion, surpassing expenditure on day-to-day running of the government by Sh5.71 billion.

Dr Njoroge said additional funds are likely to be injected into the budget by the World Bank Group before the end of this financial year in June.

“There will be significant concessional flows that will support of the government and indeed of the (foreign exchange) reserves in the next few months before the end of this fiscal year,”Dr Njoroge said.



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