NAIROBI, (The Southern African Times) – The government of Kenya is set to receive a US$2.4 billion loan from the International Monetary Fund (IMF) for budget support to weather the Covid-19 pandemic economic hardships.
International Monetary Fund (IMF) said this week that the two have inked the deal for the 38-month credit facility whose disbursement will start in the coming weeks.
Kenya had sought the loan from IMF in December 2020, making it the second following the US$739 million received in May, that Kenya applied to help it respond to the economic shocks caused by the pandemic.
The money received will be spent on the second phase of Kenya’s Covid-19 response to fill budgetary deficits as the country seeks cash for development projects.
The loan is the second extended to Kenya by the Bretton Woods organisation since the outbreak of the Covid-19 last year amid the economic fallout of the coronavirus that hurt revenue collections with aviation and tourism sectors hit hardest.
“I am pleased to announce that the Kenyan authorities and the IMF mission team have reached agreement on economic and structural policies that would underpin a 38-month program under the EFF and ECF arrangements for about US$2.4 billion,” Mary Goodman of IMF said.
“The staff-level agreement is subject to IMF management approval and Executive Board consideration, which is expected in the coming weeks, ”she added.
This signals the gravity of the country’s rapidly deteriorating cash-flow situation that is marked by falling revenues and worsening debt service obligations.
Kenya’s revenue collection in the first six months to December fell short of US$8.29 billion target by US$983 million underlining the challenges of the Covid-19 pandemic’s disruptions on businesses.
East Africa’s largest economy contracted by 5.7 percent in second quarter of last year, the deepest in nearly two decades taking a hit from the economic fallout from the Covid-19 pandemic.
The type of credit Kenya has sought from the IMF is a quick-disbursing facility where money flows straight into the budget to top up the public purse and is used at the discretion of the government.