The International Monetary Fund Board has approved about US$2.34 billion financial package for Kenya to support a move that is expected to mitigate the effect of a worsening health and economic crisis in the African state.
The three-year ECF and EFF arrangements would also advance the broader reform and governance agenda, including addressing weaknesses in some state-owned enterprises (SOEs) and strengthening transparency and accountability through the anti-corruption framework.
Beginning with an immediate disbursement of $307.5 million, the IMF in a statement asserted that the monetary aid would support the Kenyan government’s COVID-19 response while also supporting their plan to reduce debt vulnerabilities.
This comes as Fitch Ratings recently affirmed Kenya’s credit rating at ‘B+’ with a negative outlook. Fitch says that on the positive, the rating reflects the country’s strong economic growth, macroeconomic stability, and favourable public debt composition.
Estimates show that Kenya faces US$2.6 billion in sovereign external debt servicing in 2021 and US$3.6 billion in 2022.
Kenya will use a combination of the IMF financing, a US$1 billion World Bank loan as well as a Eurobond issuance in 2021 and 2022 to service this debt obligation.
According to the official data by IMF, Kenya’s Gross Domestic Product (GDP) grew by -0.1 per cent in the year 2020. The monetary body has predicted it to grow by 7.6 per cent in 2021, 5.7 per cent in 2022 and 6.1 per cent in 2023. However, IMF said that even with the expected recovery, “challenges remain in the return to durable and inclusive growth, and past gains in poverty reduction have been reversed”.