The International Monetary Fund (IMF) has made it known that its Executive Board has approved a 3 year credit facility for the East African nation of Kenya. The 3 year credit facility will amount to 2.34 billion United States Dollars which will be channeled towards supporting the country’s next phase with regards to effective responses towards the still ongoing Coronavirus pandemic, and also help the nation adequately reduce its debt levels.
The International Monetary Fund (IMF) has made it known that Kenya will immediately be given access to as much as 307.5 million United States Dollars which will be channeled towards supporting its budget.
This will be in addition to to the 739 million United States Dollars which was provided in May of 2020 by the International Monetary Fund (IMF) under the Rapid Credit Facility. It was intended to aid Kenya in fulfilling its balance of payments needs.
The International Monetary Fund (IMF) via a statement made it known that, “Kenya was hit hard at the onset by the COVID-19 pandemic. With a forceful policy response, the economy has been picking up heading into 2021 after likely posting a slight contraction of 0.1 per cent in 2020. Even with this recovery, challenges remain in the return to durable and inclusive growth, and past gains in poverty reduction have been reversed.”
The news is coming just after Fitch Ratings quite recently declared that the Credit Rating for Kenya, stands at B+ with a negative outlook. According to Fitch Ratings the B+ rating on the bright side, is a reflection of Kenya’s favourable public debt composition, strong economic growth, and macroeconomic stability.
Fitch Ratings however states that the drawbacks for Kenya include slow fiscal consolidation, public debt burden, poor governance, an increase in high external debt, and weak public finances.
The International Monetary Fund (IMF) has also observed that the ongoing Coronavirus pandemic has exacerbated the East African nation of Kenya’s fiscal vulnerabilities which already existed.
According to the International Monetary Fund (IMF), “Kenya’s debt remains sustainable, but it is at high risk of debt distress. To address debt-related risks, the authorities have taken action to hold the fiscal deficit and debt ratios to 8.7 and 70.4 percent of GDP, respectively, this fiscal year.”
According to estimates, Kenya is currently facing 2.6 billion United States Dollars in sovereign external debt servicing. It will be facing an additional 3.6 billion United States Dollars in sovereign external debt servicing in 2022.
The East African powerhouse that is Kenya, will through the use of a combination of financing from the International Monetary Fund (IMF), a Eurobond issuance in 2021 and 2022, and a 1 billion United States Dollars loan from the World Bank, fulfill its debt obligations.
The Kenyan government has also recently made it known that it will be participating in the G20s Debt Service Suspension Initiative (DSSI) in 2021, after missing out on it in 2020.
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