IMF approves funding package for Kenya

The International Monetary Fund (IMF) approved a $2.34bn (R35bn) financing package for Kenya to support the country’s Covid-19 response and address an urgent need to reduce debt vulnerabilities.

Approval of the so-called Extended Credit Facility and Extended Fund Facility will enable immediate disbursement of about $307.5m (R4.5bn) for budget support in the East African nation, the Washington-based lender said Saturday in an e-mailed statement.

“Kenya was hit hard at the onset by the Covid-19 pandemic,” the IMF said. “With a forceful policy response, the economy has been picking up heading into 2021 after likely posting a slight contraction of 0.1% in 2020. Even with this recovery, challenges remain in the return to durable and inclusive growth, and past gains in poverty reduction have been reversed.”

Kenya’s debt remains sustainable, although it is at high risk of debt distress, the IMF said. Fiscal and balance-of-payments financing needs remain sizeable over the medium term. Support from the G-20 under the Debt Service Suspension Initiative and development partners will contribute to closing the financing gap in 2021, along with financing from capital markets, according to the lender.

Public debt in East Africa’s largest economy stood at 7.35-trillion shillings ($67.5bn) as of end-January, according to the Central Bank of Kenya. Total debt increased by 659.5bn shillings from the start of the fiscal year in July. Domestic debt rose 11% in the seven months through January to 3.53-trillion shillings. Public and publicly guaranteed external debt increased 5.1% to $34.68bn at the end of January, from $33.01bn at the end of June.

Confirmed coronavirus cases in Kenya are at 136,893, with 2,186 fatalities as of April 2, according to the health ministry.

Demand for oxygen in the nation has more than doubled to 880 tonnes a month from 410 tonnes before the coronavirus pandemic struck, Health Secretary Mutahi Kagwe said March 30. Public health facilities have 16% of the gas they need, Kagwe said. While the state has 73 oxygen plants across the country, some of the facilities are producing gas with concentration levels that are at a “significant variation” from the government’s own standards, he said.

Bloomberg