Kenya will channel part of the $3 billion (Sh408 billion) loan from the Africa Export and Import Bank (Afrexim Bank) towards the fertiliser subsidy and the new fuel supply programme trial.
The bank on Tuesday announced the disbursement of the funds meant to cushion various sectors of the economy from external shocks.
National Treasury Cabinet Secretary Njuguna Ndung'u said the funds will ‘protect the market’ as the government looks to restructure the prices of sectors such as energy in the long term.
“This programme will help Kenya in supporting its liability management efforts by leveraging various instruments offered by the bank. In our liability management, it will help in solving the short term expensive commercial debt in favour of concessional funding,” said Ndung'u.
Kenya is facing financial stress resulting from debt maturity pressures and rapidly rising debt-servicing costs in recent months, and is considering a variety of initiatives, including the issuance of another Eurobond, to address the problem.
The loan by Afrexim Bank comes under the Kenya Country Programme and will be channelled to food, fertiliser, debt management, climate change, digital economy and SMEs.
The bank's president and board chairman Benedict Oramah said the loan will be disbursed over a three-year period and will attract a varying interest depending on the initiative that will get the financing.
“This facility that has been negotiated with the government is built around the commercial banks and the trading companies in a way that it doesn’t add additional debt burden in the country,” said Oramah.
The lender said the financing will aid in the construction of an additional 200 dams in the country that will enable farmers irrigate and promote access to clean water.
The funds will be distributed to various sectors of the economy to help the government manage the economic challenges arising from by global impacts.
The funding will also promote the importation of critical commodities that are expected to lower the country's high living costs while also supporting post-Covid recovery infrastructure projects and increasing industrialisation.
Trade and Industry Cabinet Secretary Moses Kuria said part of the funds would also be channelled to the Kenya National Trading Corporation (KNTC) to aid in providing cheaper imports.
“This will support initiatives such as support of letters of credit for the import of food and fertilisers,” said Kuria.
KNTC was cleared last year to lead the government's initiatives to stabilise the pricing of essential good.
The loan will also go into manufacturing and agro-processing export development such as setting up industrial parks and promotion of intra-Africa trade under the African Continental Free Trade Area (AfCFTA)—an initiative of the African Union.
