IMF approves $2.34 billion in new financing arrangements for Kenya

WASHINGTON (Reuters) – The Worldwide Financial Fund on Friday mentioned its board had accredited new three-year financing preparations for Kenya valued at $2.34 billion to assist the African nation proceed responding to the COVID-19 pandemic and handle its debt vulnerabilities.

Approval of the brand new loans below the Fund’s Prolonged Credit score Facility and Prolonged Fund Facility will allow instant disbursement of about $307.5 million that Kenya can use for funds help, including to $739 million it obtained in emergency COVID-19 assist in Might 2020, the Fund mentioned in a press release.

The IMF mentioned Kenya’s debt remained sustainable, however it was at excessive danger of debt misery, and authorities ought to focus their near-term agenda on pressing structural coverage challenges.

For practically two years, Kenya has deserted costly industrial debt to chop again on ballooning repayments, whereas income assortment has been squeezed by the pandemic.

It additionally faces large funds deficits which were deepened by the coronavirus disaster.

“This system supported by EFF/ECF preparations with the Fund offers a powerful sign of help and confidence,” IMF Deputy Managing Director Antoinette Sayeh mentioned in a press release. “The Kenyan authorities have demonstrated sturdy dedication to fiscal reforms throughout this unprecedented world shock, and Kenya’s medium-term prospects stay constructive.”

Kenya was hit arduous on the onset by the COVID-19 pandemic, however its financial system has been selecting up after probably posting a slight contraction of 0.1% in 2020, the IMF mentioned.

It mentioned it forecast a pointy swing to development of seven.6% in 2021 and 5.7% in 2022, however mentioned Kenya continued to face challenges within the return to sturdy development, and its previous features in poverty discount had been reversed.

The COVID-19 shock had additionally exacerbated the nation’s pre-existing fiscal vulnerabilities, the IMF mentioned, though Kenyan authorities had taken motion to carry the fiscal deficit and debt ratios to eight.7 and 70.4% of GDP, respectively, this fiscal yr.

Help from a Group of 20 moratorium on debt service funds and growth companions will assist Kenya shut its financing hole in 2021 together with financing from capital markets.

Sayeh mentioned Kenya was taking steps to scale back debt-related dangers, however ought to proceed to supply needed help to the financial system and deal with pressing structural coverage challenges, together with monetary weaknesses in some state-owned enterprises.