Broke Kenya Seeking Extra Covid-19 Loan From IMF

KEY POINTS 

  • It is the second time in less than six months the government reached out to the Bretton woods institution.
  • This shows the gravity of the country's rapidly deteriorating cash-flow situation marked by a reduction of revenues and worsening debt service obligations.
  • The Jubilee administration set to borrow an average of Sh2.5 billion daily before President Uhuru retire in 2022, fighting its growing quest for foreign debts.

Kenya has reached out to the International Monetary Fund (IMF) for budget support to deal with economic hardships occasioned by the coronavirus pandemic.

It is the second time in less than six months the government reached out to the Bretton woods institution.

IMF resident representative Tobias Rasmussen said Kenya has asked the institution for a loan following the $739 million (Sh79.3 billion) received in May that sought to help it respond to the economic shock brought in by the pandemic.

This shows the gravity of the country’s rapidly deteriorating cash-flow situation marked by a reduction of revenues and worsening debt service obligations.

The type of credit the country is seeking from IMF is a quick-disbursing facility where the cash is directly injected into the budget to top up the public purse and is utilized at the discretion of the government.

“Following up on the support provided by the IMF in May under our Rapid Credit Facility (RCF), the Kenyan authorities have expressed interest in a Fund arrangement. IMF staff is in discussions with the authorities toward such an arrangement,” Mr Rasmussen told the Business Daily.

The budget support funding has no specific projects and it can be used to finance any politically important activities.

This comes amid an increase in Covid-19 cases that has seen infections jump by 45 percent with the country recording 56, 601 over the past month, and fatalities 42 percent to 1027.

The spike in cases could trigger fresh restrictions from the government risking reducing economic activity and denying the Kenya Revenue Authority an opportunity to grow its tax collection.

Tax collection in the last three months has dropped 14.69 percent to Sh317.6 billion, raising fears Kenya’s budget deficit for this financial year could increase due to revenue shortage.

In September, the Treasury said it was in early talks with the World Bank seeking an additional budgetary support loan, which was going to be used in this financial year.

The Jubilee administration set to borrow an average of Sh2.5 billion daily before President Uhuru retire in 2022, fighting its growing quest for foreign debts.

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This implies that President Kenyatta will have borrowed at least Sh6.1 trillion to implement his 10-year manifesto while in power.

The increased debt has been Kenya commit more than half of taxes to pay its debts, leaving little cash for development projects.

Kenya is planning to spend Sh904.7 billion on debt repayment this financial year ending 2021 from Sh707.8 billion last year against expected taxes of Sh1.52 trillion.

This implies that nearly 60 percent of taxes will be committed to debt repayments.

Related: Kenya To Borrow Sh2.5bn Daily Until Uhuru Leaves Office

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