Kenya and 71 other countries eligible for the Rapid Credit Facility (RCF) from the International Monetary Fund (IMF) now have a leeway to borrow beyond their annual limits.
This is after the IMF’s executive board approved a temporary increase in the annual limits on overall access to resources in the General Resources Account and the Poverty Reduction and Growth Trust on Wednesday.
The facility is advanced to low-income countries facing urgent balance of payment needs.
It mainly focuses on the reduction of poverty levels as well as enhancing growth objectives by providing high levels of concessions unlike market rates.
IMF noted that the COVID‑19 pandemic had triggered a uniquely severe synchronised shock across the global economy and an ensuing surge in requests for financial support under the Fund’s emergency financing instruments.
''While access limits under these instruments had already been increased temporarily in April, directors recognised that many countries, in seeking to contain the impact of the pandemic and to lay the basis for economic recovery, would likely need additional financial support from the Fund in the coming year,’’ it said in a statement.
It added that requests for financial assistance in excess of these annual limits trigger the application of the relevant exceptional access framework, where the request will be subject to tighter scrutiny and can be approved only if specified criteria are met.
The lender revealed that as of July 13, a total of 72 countries had already received financial support from the IMF’s emergency financing instruments with further requests for assistance likely to be met through the IMF’s regular lending instruments expected in the months ahead.
In May, Kenya received a $739 million (Sh79.3) billion loan from IMF to help the country fight Covid-19 as part of RCF.
The lender said the impact of Covid-19 on Kenya's economy would be severe, adding that it will act through both global and domestic channels, but downside risks remain large.
"While the authorities have taken decisive action to respond to the pandemic's health and economic impacts, the sudden shock has left Kenya with significant fiscal and external financing needs," IMF said.
Kenya has in the past been able to access various forms of financing from the IMF dating back to 1975.
In March 2016, the lender advanced arrangement totaling to $1.5 billion through a standby arrangement (SBA) and a standby credit facility (SCF) of $989.8 million and $494.9 million, respectively.
The facility however expired in 2018 after an extension. The country has been reviewing its fiscal policies to meet the IMF’s demand for the renewal of the loan that majorly acts as a foreign exchange buffer.
The IMF team, which was on the last review in Kenya early this year, gave the country a clean bill of health, an indication of a possible disbursement upon application.
