Kenya is holding talks with the International Monetary Fund (IMF) for a fund arrangement, barely six months after it obtained US$ 739 Million in May to enable it weather disruptions caused by the coronavirus pandemic.
According to IMF Resident Representative Tobias Rasmussen, the Kenyan Government has asked for the Bretton woods institution for a fund arrangement to assist the government to respond to ravages caused by the pandemic.
Rasmussen told Business Daily that Kenyan authorities have expressed interest in a fund arrangement, and that the IMF staff is in discussions with the authorities for a Rapid Credit Facility(RCF).
Data from Central Bank of Kenya shows that the level of public debt has risen from KSh 5.8 trillion in June 2019, to KSh5.9 trillion in September 2019, KSh6 trillion -December 2019, KSh 6.3 trillion-March 2020, KSh 6.7 Trillion in June, KSh 6.9 trillion in July and KSh 7.1 trillion in August this year.
“Kenya isn’t broke. Seeking IMF Assistance at a time when the economy has suffered multiple shocks (and Kenya was seeking for a stand-by arrangement even prior to COVID) is sensible,” said Razia Khan- Chief Economist and Head of Research, Africa and the Middle East at Standard Chartered Bank.
On May 6th, 2020 the IMF Executive Board approved a US$739 Million credit facility to Kenya to assist the country address the impact of the COVID-19 Pandemic. This was 100% of the quota, drawn under the Rapid Credit Facility (RCF) to help Kenya deal with COVID-19 disruptions.
The IMF had warned of the severe impact of COVID-19 on Kenya’s economy, saying the pandemic shocks have increased Kenya’s fiscal and external financing needs.
This facility was to among other needs, assist Kenya to maintain an adequate level of forex and assist its response to the pandemic.
Central Bank of Kenya (CBK) figures indicate a rapid deterioration of foreign reserves, piling more pressure on a battered Kenya Shilling.
For instance, CBK official foreign exchange reserves hit US $8.2 billion when markets closed on October 22, 2020, a drop of $615 Million within a month. There has been a consistent decline in official forex reserves held at the CBKs from $8.838 billion on September 17, 2020, $8.627 billion on September 24, 2020, $8.533 billion on October 1, 2020, $8.454 billion on October 8 and $8.223 billion on October 22, 2020.
Mr Tao Zhang, IMF Deputy Managing Director and Acting Chair, after the IMF Board discussions on Kenya in May this year, told CBK to continue to stand ready to support the economy and the financial sector’s health, as necessary, while ensuring those policy decisions are data-driven.
Kenya’s request for further assistance from the IMF comes as the country experiences a fresh surge in new COVID-19 infection and death rates. The political class has also ignored health protocols in their push to marshal public support for the Building Bridges Initiative (BBI)-a precursor to possible changes to the constitution through a referendum.
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