CREDIT

IMF approves Kenya's $2.34 billion loan request

The lender said Kenya’s debt remains sustainable, but it is at high risk of debt distress.

In Summary
  • This will be the second time within a span of less than a year Kenya  tapping into IMF's Extended Fund Facility
  • The new facility is expected to push further Kenya's public debt which was captured at Sh7.28 trillion in December last year.
CAUTION: IMF wants local banks to tread carefully in regional expansion.
CAUTION: IMF wants local banks to tread carefully in regional expansion.

Kenya will immediately receive $305 million (Sh33.2 billion)  after the International Monitory Fund (IMF) approved the country's $2.4 billion (Sh261 billion) Friday.

The international lender said  the three-year financing package will support the next phase of the authorities’Covid-19 response and their plan to reduce debt vulnerabilities while safeguarding resources to protect vulnerable groups.

''It will also advance the broader reform and governance agenda, including by addressing weaknesses in some state-owned enterprises (SOEs) and strengthening transparency and accountability through the anticorruption framework,'' IMF said in a statement released midnight. 

This will be the second time within a span of less than a year Kenya  tapping into IMF's Extended Fund Facility and Extended Credit Facility arrangements after receiving $738 million in May last year. 

The board approval comes two months after IMF staff held talks with Kenya's authorities.

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.

 IMF deputy managing director and acting board chair Ms Antoinette Sayeh said the facility  charts a clear path to reduce Kenya's debt-related risks.

''It will bring the primary balance below its debt-stabilizing level  and restore tax revenue – which had been falling even before the Covid-19 shock – back to levels achieved in recent years,''Sayeh said.

IMF said Kenya’s debt remains sustainable, but it is at high risk of debt distress.

To address debt-related risks, Kenya has committed to  hold the fiscal deficit and debt ratios to 8.7 and 70.4 per cent of GDP, respectively, this fiscal year.

The country also expects the support from the G-20 under the Debt Service Suspension Initiative (DSSI) and development partners will contribute to closing the financing gap in 2021 along with financing from capital markets.

The new facility is expected to push further Kenya's public debt which was captured at Sh7.28 trillion in December last year.

The country is also planning to go for the fourth Eurobond issue to settle most of its due debt even as the World Bank's loan suspension programme expiry time approaches.