Yesterday, the International Monetary Fund (IMF) Executive Board approved Sh78.4 billion ($739 million). Kenya had applied for emergency financing to help her respond to the sudden economic shock caused by the Covid-19 pandemic.
“Emergency financing under the Rapid Credit Facility (RCF) will deliver liquidity support to help Kenya cover its balance of payments gap this year. It will provide much-needed resources for fiscal interventions to safeguard public health and support households and firms affected by the crisis,” said IMF deputy managing director Tao Zhang in a statement.
Financing under the RCF carries a zero interest rate, has a grace period of five and a half years, and a final maturity of 10 years, according to the IMF concessional lending terms.
Kenya case statistics as of May 7 stood at 582 cases, 190 recoveries and 26 deaths. The government on Wednesday announced a 15 days lockdown on two virus hotspots, Eastleigh in Nairobi and Mombasa City. Nairobi and Mombasa have been previously placed under a similar measure being the most impacted counties.
In April this year, IMF excluded Kenya from the list of countries granted loan interest payments waivers because it’s per capita income was above $1,215 (Sh128,790).
IMF was granting a reprieve to countries whose per capita income was below $1,215 (Sh128,790), which is lower than Kenya’s $1,710 (Sh181,260).
Kenya, which is classified as a lower-middle-income country, recently joined mounting calls to rich nations like China and Group of 20 (G20) to hold off debt interest payment this year for poor and developing nations amid worsening economic fallout from the Covid-19 pandemic.
Rwanda and the Democratic Republic of Congo (DRC) are among the first debt relief beneficiaries of the IMF after the multilateral lender approved this year’s loan interest payments waivers for 25 countries.
“Today, I am pleased to say that our executive board approved immediate debt service relief to 25 of the IMF’s member countries under the IMF’s revamped Catastrophe Containment and Relief Trust as part of the fund’s response to help address the impact of the Covid-19 pandemic,” said managing director Kristalina Georgieva in a statement.
Other African countries that received debt service relief under the deal are Benin, Burkina Faso, Central African Republic, Chad, Comoros, The Gambia, Guinea and Togo.
In March this year, Kenya was seeking Sh122.5 billion ($1.15 billion) emergency funding from the International Monetary Fund (IMF) and the World Bank to support the slowing economy in the face of the coronavirus crisis.
Central Bank of Kenya (CBK) Governor Patrick Njoroge said Sh85.2 billion ($800 million) is expected in early May from the World Bank and Sh37.3 billion ($350 million) from the IMF.
“We are working with IMF for an emergency assistance that does not have the conditionalities of other programmes. A lot of this will be directed to budgetary support,” Dr Njoroge said, adding that more support will be sought from the World Bank.
Treasury Cabinet Sectary Ukur Yatani expects government revenue collection to be hit as both imports and domestic consumption slow down in what will force a review of the national budget.
“We are looking at underperformance as a result of just Covid-19, of about Sh70 billion … in terms of revenue for the remaining three months (of this financial year),” he told Reuters, adding that the situation was evolving fast. The CBK has also cut its 2020 economic growth forecast from an initial estimate of 6.2 percent to 3.4 percent — the lowest since 2008 when Kenya was buffeted by the global financial crisis and the effects of the bloody post-election violence. Growth dropped from 7.1 percent in 2007 to 1.7 percent in 2008. The government has responded to the pandemic with tough travel, mass gathering and isolation rules meant to curb the spread of the virus.
The pandemic has damaged almost all sectors of the economy. Agriculture, which accounts for about a third of overall output, has been hit hard with a plunge in the export of cut flowers, fruits and vegetables. Tourism, the third-biggest foreign-exchange earner after remittances and farm shipments, has dried up.
“The impact of Covid-19 on the Kenyan economy will be severe. The sudden shock has left Kenya with significant fiscal and external financing needs,” the IMF said.
Last month, President Uhuru Kenyatta said the resources will help Kenya deal with the economic impact of the Covid-19 pandemic while acknowledging that debt relief by rich economies to countries like Kenya will also come in handy at this time.
“The countries with the largest economies in the world are in discussion with ourselves on the issue of suspension of debt for a period in order to allow countries to be able to spend more in combating this pandemic and its effects as well as the economic recovery that needs to also come,” said President Kenyatta.
“Other regional and global institutions have also stepped up; for example, the African Development Bank and the African-Import Export Bank, which have created emergency credit facilities for countries like ours,” he added.