The International Monetary Fund(IMF) is considering a request by Kenya for a US$ 2.3 billion loan to assist it to cope with the negative effects of coronavirus pandemic.
Discussions are expected to be concluded by the IMF Board within the first four months of 2021.
Kenya is targeting initial cash of US$ 725 Million to finance its programs listed in the current financial year ending June 2021, according to statements from Treasury Cabinet Secretary Ukur Yatani.
He said this loan is meant to support Kenya’s response to COVID-19 pandemic while pursuing a revenue-driven fiscal consolidation-one of IMF’s conditionalities.
Kenya is seeking the IMF loan to help it deal with mounting debt, estimated at KSh 7.1 Trillion as at September 2020.
With dwindling foreign exchange reserves and lower inflows from exports, the Kenya Shilling exchange rate against the US dollar has been under pressure in recent months.
Data from the CBK shows that foreign exchange reserves have declined from $8.2 Billion on October 22nd, 2020 to $ 7.9 Billion on November 19th, 2020.
According to CS Yattani, the Government has had to scale down several key projects under President Uhuru Kenyatta’s Big 4 Agenda, due to funding constraints.
Treasury projects Kenya’s GDP to grow by under 1%, compared to 5.4% the previous year.
It is these grim prospects that have also pushed the Government to seek a $ 1.5 Billion development assistance from the World Bank.
Yattani is optimistic that Kenya will be able to access this World Bank facility towards the end of the 2020/21 financial year, ending in June next year.
The World Bank deal will depend on Kenya’s ability to carry out a fiscal consolidation program that has been prescribed by the IMF.