The executive board of the International Monetary Fund (IMF) on Friday, April 2 approved a Ksh255 billion for Kenya.
Kenya will use the loan to curb the Covid-19 pandemic and reducing debt vulnerabilities. IMF will offer the loan in instalments for three years.
Approval of the loan under the fund’s Extended Credit Facility and Extended Fund Facility, ECF/EFF, will enable the immediate disbursement of Ksh33.5 billion which can be used for budget support.
Treasury CS Ukur Yatani (right) with a representative of the Japanese government pose for a photo after agreeing on a loan deal at the Treasury Buildings on February 27, 2020.
According to the IMF, Kenya’s loan remains sustainable, but the country is at high risk of debt distress and the authorities should focus their near-term agenda on urgent structural policy challenges.
“The Kenyan authorities have demonstrated a strong commitment to fiscal reforms during this unprecedented global shock, and Kenya’s medium-term prospects remain positive.
“The program supported by EFF/ECF arrangements with the Fund provides a strong signal of support and confidence,” IMF Deputy Managing Director, Antoinette Sayeh, said in a statement.
With a forceful policy response, the Kenyan economy which was hit hard by Covid-19 since March 2020, has been picking up heading to 2021 after posting a slight contraction of 0.1 in 2020.
In order to address risks related to debt, the Kenyan government has taken action to hold the fiscal deficit and debt ratios to 8.7 and 70.4 percent of the GDP, respectively this fiscal year.
“The Central Bank of Kenya’s (CBK) proactive policy stance has provided essential support during a very challenging period.
“Monetary policy should remain accommodative in the context of the inflammation targeting regime, the exchange rate should continue to function as a shock absorber and close supervision of credit risks and provisioning should be maintained,” Sayeh said.
Kenya, for nearly two years, has abandoned expensive commercial debt in order to cut down on repayments.
Treasury CS Ukur Yattani (with briefcase) poses for a photo with his docket’s officials before reading the Budget 2020/21 in Parliament on Thursday, June 11, 2020