Kenya seeks fresh financing as IMF kicks off mission in the country
President William Ruto meets with IMF Managing Director Kristalina Georgieva on the sidelines of COP27 in Sharma El-Sheikh, Egypt.
What you need to know:
- Kenya is looking to tap into IMF's Resilience and Sustainability Facility which is designed to provide long-term financing to bolster economic resilience.
Kenya is seeking fresh concessional financing from the International Monetary Fund (IMF) as the Bretton woods lender kicks off its mission in the country this week.
According to the Fund’s Managing Director, Kristalina Georgieva, Kenya is looking to tap into the fund’s Resilience and Sustainability Facility which is designed to provide long-term financing to bolster economic resilience and mitigate balance of payments challenges.
“We have a very strong programme with Kenya that we are financing now. We intend to expand by deploying a new long-term concessional financing instrument. We have created the Resilience and Sustainability Trust and there will be a team here on the week starting May 7th to work on that”, Kristalina told Nation.Africa.
A country’s access to the Resilience and Sustainability Facility is capped at 150 per cent of its quota or the equivalent of a billion Special Drawing Rights, whichever is lower. This implies that should Kenya secure financing through this window, it will be eligible to receive up to $1.1 billion, or just about Sh150.1 billion at the present exchange rate, in fresh funding from the IMF.
Disbursements from the IMF’s Resilience and Sustainability Facility typically have a 20-year repayment period and a 10.5-year grace period during which no principal is repaid. To be eligible for financing under the Resilience and Sustainability Facility, a country needs to be having a concurrent IMF supported programme such as the ongoing 38 months $2.41 billion programme Kenya has under the fund’s Extended Credit Facility and Extended Fund Facility arrangements.
The IMF Managing Director says that her meeting with President William Ruto and members of the Cabinet during her visit last week was focused on the country’s inability to access the global financial markets owing to the prevailing tightened conditions.
“The meeting with the President and cabinet members was focused on how Kenya can overcome the exogenous shocks it is experiencing. We know that as a result of Covid-19 and the war in Ukraine, inflation shot up, interest rates jumped and countries like Kenya found themselves like innocent by-standers hit by those shocks. For Kenya what it has meant is no access to international markets for now and therefore pressure to withstand this funding squeeze”, Ms Georgieva said.
The ongoing IMF mission in Kenya is also expected to conduct the fifth review of the ongoing 38 months $2.41 billion programme and comes at a time when Haimanot Teferra has just taken over as the fund’s Mission Chief to Kenya having succeeded Mary Goodman. Kenya has so far accessed $1.66 billion under the ongoing programme which was started in April 2021.
