Kenya says it will need the International Monetary Fund’s support to supplement its official foreign exchange reserves and budget support to address the current crisis triggered by the coronavirus pandemic.
Treasury Cabinet Secretary Ukur Yatani says this will be through the IMF’s Rapid Credit Facility (RCF) which they have already made a request.
The Rapid Credit Facility (RCF) provides rapid concessional financial assistance with limited conditionality to low-income countries (LICs) facing an urgent balance of payments need.
In an op-ed, he also disclosed that “Kenya expects to successfully enter a 3-year IMF/WB supported precautionary facility arrangement by end of April 2020 to safeguard the economy against further effects of the shock.”
The National Treasury’s preliminary estimate expects the economy to contract by at least 50 percent.
“The country has witnessed falling foreign exchange receipts due to drop in exports, diaspora remittances and tourism earnings. The drop in demand, disruption of the supply chain and the sharp deterioration of global financial conditions has negatively affected tax revenue collection with the government responding through various measures to ‘save life’ and safeguard the economy,” says Ukur Yatani.
This has necessitated it to re-assess its current Medium Term Debt Strategy to take into account the evolving effects of covid-19 pandemic.
“Kenya will restrict external commercial loans for refinancing existing commercial debts to lower cost and risks. In addition, commercial borrowing will be used to finance those capital expenditures that cannot attract concessional financing by their nature, for instance, security projects. Efforts will be scaled-up to utilise highly concessional loans from multi-lateral and bi-lateral sources on concessional terms,” says Yattani.