CREDIT

IMF to decide on Kenya's $2.4bn loan request Friday

In May last year, the IMF gave Kenya Sh79 billion through the Rapid Credit Facility to help deal with help the negative effects of the pandemic.

In Summary
  • The first tranche of $314 million is expected next week
  • The money is also expected to help the country reboot the economy following the adverse effects of the Covid-19 pandemic amid shrinking revenues.
CBK Governor Dr Patrick Ngugi Njoroge.Photo/File
CBK Governor Dr Patrick Ngugi Njoroge.Photo/File

The International Monetary Fund (IMF) board will on Friday decide on Kenya's $2.4 billion (Sh261 billion) loan request, Central Bank Governor Patrick Njoroge has said. 

Speaking at a post Monitory Policy Conference (MPC) briefing Tuesday, Njoroge exuded  confidence that the lender will grant Kenya's request and disburse the first tranche of $314 million (Sh34.2 billion) next week.

''The IMF board is meeting on April 2 where it is likely to approve Kenya's request of $2.4 billion facility for budgetary support especially on external debt obligation,'' Njoroge said.

The money is also expected to help the country reboot the economy following the adverse effects of the Covid-19 pandemic amid shrinking revenues.

The IMF staff led by Mary Goodman conducted virtual missions to Kenya from December 9 to 17, 2020, and from February 4 to 15, 2021 to undertake negotiations on a combined 38-month program under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) arrangements.

The staff approved the facility pending a decision from the IMF board. 

Should Kenya receive the funds, it will have received a total of Sh340 billion from the Bretton Woods institution since Covid-19 pandemic hit Kenya March last year.

Last May, the IMF gave Kenya Sh79 billion through the Rapid Credit Facility to help deal the socio-economic effects of the pandemic.

Last month, IMF indicated that Kenya spent approximately $2.4 billion  by end of last year to fight the social-economic pressures of Covid-19.

The summary of the country’s fiscal measures in response to the Covid-19 pandemic as compiled by IMF shows the country spent $2.3 billion on non-health measures and $100 million on healthcare.

The amount was the second-highest amongst low middle income earning countries, with Nigeria topping the list, with an expenditure of  $6.4 billion or 1.5 per cent of its gross domestic product.

Kenya is counting on the cash to pay some of its due loans pushed  to end of June courtesy of G20 debt suspension programme.  The suspension is only on multilateral loans. 

In addition to the freeze, the G20 also wants private creditors to voluntarily waive debt service for low-income countries, including Kenya, which have been hooked to the Eurobond market.

Before the end of the current financial year, Kenya is expected to pay Sh67.3 billion in interest to private investors including Eurobond holders and commercial banks.

To  clear this year's debt obligation, the National Treasury is considering floating a fourth Eurobond in less than seven years to help pay a Sh925 billion debt in the next three months.

This comes against a backdrop of weaker credit rating by global rating agencies pointing out that Kenyan tax payers will have to dig deep into their pockets to service the planned loan.

The three global rating agencies — S&P, Fitch and Moody’s Investor Service — have downgraded the country’s credit status largely due to its faster  accumulation of debt against falling revenue collection.