NAIROBI, Kenya, Apr 3 – The International Monetary Fund has approved new three-year financing for Kenya valued at Sh255.9 billion to support the government’s COVID-19 response and address the urgent need to reduce debt vulnerabilities.
In a statement, the National Treasury says the facility, which is under the IMF’s Extended Credit Facility and Extended Fund Facility, includes an initial disbursement of Sh79 billion, due for release by June 30th 2021.
Treasury further reveals of the amount, a total of Sh33.7 billion will be released immediately and is usable for budget support.
Meanwhile, Sh44.2 billion will be released by June 30th, while the balance will be disbursed following subsequent programme reviews conducted approximately every 6 months.
Commenting on the approval of the facility, IMF’s Deputy Managing Director and Acting Chair Antoinette Sayeh said the facility will also be used to safeguard resources to protect vulnerable groups
Sayeh said the COVID-19 shock has exacerbated the country’s pre-existing fiscal vulnerabilities, but says its debt remains sustainable.
She however warned that it is at high risk of debt distress.
“To address debt-related risks, the authorities have taken action to hold the fiscal deficit and debt ratios to 8.7 and 70.4 percent of GDP, respectively, this fiscal year. Fiscal and balance-of-payments financing needs remain sizable over the medium term.”
According to the IMF, the facility would set a basis for a resurgence of growth and shared prosperity.
“Building on critical steps already taken, it aims to reduce debt vulnerabilities through a multi-year fiscal consolidation effort centered on raising tax revenues and tightly controlling spending, safeguarding resources to protect vulnerable groups,” the Fund said in a statement.
IMF also expects the facility to strengthen the monetary policy framework and support financial stability.
“Against the backdrop of extraordinary uncertainty, the program incorporates flexibility, including by recognizing near-term challenges related to tax yields in the current stressed economic environment and possible contingent liabilities from the SOE sector.”