The International Monetary Fund’s Executive Board has approved approximately Sh79 billion (US$739 million) disbursement to Kenya to address the impact of the Covid-19 pandemic.
In a statement released in Washington DC Wednesday, the Board noted that while the government has taken decisive action to respond to the pandemic’s health and economic impacts, the sudden shock has left Kenya with significant fiscal and external financing needs.
According the statement, the financing, to be drawn under the Rapid Credit Facility, will help to meet Kenya’s urgent balance of payments need, maintain an adequate level of international reserves and provide the necessary budget financing to respond to the pandemic.
Speaking at the conclusion on the Board’s discussion, IMF Deputy Managing Director and Acting Chair Mr. Tao Zhang stated, “The COVID-19 pandemic has delivered a large economic shock to Kenya. The pandemic has impacted nearly all facets of the economy—particularly tourism, transport, and trade—and led to urgent balance of payments and fiscal financing needs.”
“Emergency financing under the RCF will deliver liquidity support to help Kenya cover its balance of payments gap this year. It will provide much-needed resources for fiscal interventions to safeguard public health and support households and firms affected by the crisis. It will also catalyze necessary financing from other donors,” the release read in part.
Mr. Zhang observed that, “The Central Bank of Kenya (CBK) has taken various measures to maintain sufficient liquidity in the financial sector. It should continue to stand ready to further support the economy and the financial sector’s health, as necessary, while ensuring that policy decisions are data-driven. The CBK should also continue to allow the exchange rate to act as a shock absorber.”
While commending the pause in the government’s fiscal consolidation plans to accommodate Covid-19 as appropriate, he advised that once the crisis abates, it is critical that the authorities resume their pursuit of a growth-friendly medium-term fiscal adjustment, including raising revenues as a share of Gross Domestic Product (GPD), to reduce debt vulnerabilities.
He also noted that the Kenyan government planned to conduct independent post-crisis auditing of COVID-19 related expenditures and publish the results to ensure that COVID-19 related resources are used for their intended purpose.
The release states that IMF is in close contact with the Kenyan authorities and stands ready to provide policy advice and further support, as needed.
The credit facility comes in the backdrop of CBK Governor Dr. Patrick Njoroge’s March appeal to Bretton Woods institutions (IMF and World Bank) for budget support amounting to Sh115 billion to bail out the economy dampened by the Covid-19 crisis.
Last April, World Bank also supported Kenya’s Covid-19 Emergency Response Project to the tune of Sh5.3 billion (US$50 million).