The International Monetary Fund's Sh78.4 billion support to Kenya towards coping with the Covid-19 shocks is a show of confidence on one hand but on the other raises its debt burden, according to analysts.
“It implies confidence in Kenya's ability to navigate the shocks without resorting to drastic measures,” Financial risk management and investment expert Mihr Thakar told the Star.
Last month Kenya missed out on the International Monetary Fund’s debt service relief to poor countries as it’s per capita income was above $1,215 (Sh128,790)
However, on Wednesday, IMF’s executive board approved Sh78.4 billion under the Rapid Credit Facility (RCF) to the country to help the government meet its urgent balance of payment needs stemming from the outbreak of the pandemic.
Financing under the RCF carries a zero interest rate and has a grace period of five and a half years with a final maturity of 10 years.
Sectors including tourism, transport, and trade have been negatively impacted as a result of coronavirus, largely reducing the country’s foreign cash inflows.
“The COVID-19 pandemic has delivered a large economic shock to Kenya. The pandemic has impacted nearly all facets of the economy and led to urgent balance of payments and fiscal financing needs," IMF deputy managing director and acting board chair Tao Zhang said.
He lauded the government’s fiscal consolidation plans to accommodate COVID-19-related measures adding that they should be temporary and well-targeted.
Access to RCF financing is determined on a case-by-case basis, taking into account the country’s balance of payments need, the strength of its macroeconomic policies, capacity to repay the Fund, the amount of outstanding Fund credit, and the member’s record of past use of Fund credit.
According to Tao Zhang, the government of Kenya promised to carry out independent post-crisis auditing to ensure that COVID-19 resources are used appropriately.
"We thank IMF Board for their confidence in our policy measures despite the difficult times occasioned by the COVID -19 pandemic. This support will enable National treasury address gaps in our budget implementation," Treasury CS Ukur Yatani said.
Financial analyst Aly Khan Satchu welcomed the move by IMF. He said the country is not in a privileged position like the developed economies adding that a total lockdown looks impossible.
“It is critical now we up our game, otherwise we remain in a ''Groundhog Day'' and a negative feedback loop where the economy will be covid-ed,” he said.
Kenya’s request for IMF’s Sh150 billion standby credit facility is yet to be determined.
“The IMF may actually grant Kenya the standby facility if it is convinced by the fiscal consolidation plans that succeed the infection saga,” Thakar said.
