Kenya has received a Sh78.4 billion ($739 million) loan from the International Monetary Fund (IMF) to help Kenya cushion the economy from the fallout caused by the Covid-19 pandemic.
The National Treasury, which announced in March it was seeking Sh122.5 billion ($1.15 billion) emergency funding from the IMF and the World Bank to support its virus-damaged economy, said yesterday the Sh78.4 billion would provide a "breathing space".
"This initial dose will give us a breather in our budget implementation undertaking," said Treasury Secretary Ukur Yatani.
He added the World Bank had received Kenya's application for Sh1 billion extra funding on April 19 hence Kenya was anticipating more funding.
The Sh78.4 billion IMF loan that was approved yesterday will attract a zero interest rate.
It will have a grace period of five and a half years, and a final maturity of 10 years, according to the IMF concessional lending terms.
“Emergency financing under the Rapid Credit Facility (RCF) will deliver liquidity support to help Kenya cover its balance of payments gap this year," said IMF deputy managing director Tao Zhang in a statement.
"It will provide much-needed resources for fiscal interventions to safeguard public health and support households and firms affected by the crisis."
The IMF warned the impact of the Coronavirus fallout on the Kenyan economy will be "severe" but added it stands ready to provide policy advice and further support, as needed. Kenya confirmed 25 new cases of Covid-19 raising the numbers to 607 amid fears of prolonged containment measures that have since hurt aviation, tourism and farm exports.
"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," Mr Zhang said.
The IMF said while Kenyan authorities have taken "decisive action" to respond to the pandemic’s health and economic impacts, the sudden shock has left the country with significant fiscal and external financing needs.
"We thank IMF Board for their confidence in our policy measures despite the difficult times occasioned by the Covid-19 pandemic," said Mr Yatani in interview with the Business Daily.
Travel restrictions and social distancing rules look set to impact on consumer spending, setting the stage for deep job cuts and unpaid leave to workers struggling with reduced cash flow.
The Treasury expects government revenues to be hit as both imports and domestic consumption slow down in what has forced a review of the national budget.