The government will borrow Sh275 billion from three international financial institutions to cushion Kenyans and the economy from the negative impact of Covid-19.
National Treasury is in the final stages of sealing deals with World Bank (Sh100 billion), European Union Investment Bank (Sh100 billion) and the International Monetary Fund (IMF) Sh75 billion to bridge the deficit in the country’s revenues created by the pandemic effect on the economy.
Additionally, the National Treasury has awarded Sh20 billion by the European Union (EU) and another Sh6 billion from World Bank in grants.
Yesterday, Treasury Cabinet Secretary Ukur Yatani downplayed the concerns of the rising debt, saying the government was more concerned about saving lives as opposed to the resulting debt as he painted a gloomy picture of the economy.
“We expect to receive the EU grant in two days. We are finalising the paper work for concessional loan with the EU Investment Bank to help not only the agricultural sector, but boost tourism, infrastructure among others,” Yatani said.
The request to the IMF was made yesterday and the CS said they expect a response in 10 days. The World Bank had already given Kenya Sh6 billion.
He explained that the government had received Sh6 billion from WB to mitigate the effects of the virus.
“We received Sh1 billion in the week we announced the first case and an additional Sh5 billion later towards the Covid-19 prevention measures. We are also engaging the firm for additional Sh100 billion loan,” Yatani said.
He said the government had released Sh1.3 billion via M-Pesa to vulnerable Kenyans in slums to mitigate the effects of the pandemic, a process that will eventually take Sh10 billion. This is separate from the Sh8.5 billion, part of the Sh26 billion annual disbursement through the normal cash transfer.
Raise more funds
Appearing before the Senate Ad Hoc committee on Covid-19 pandemic, chaired by Nairobi Senator Johstone Sakaja, the CS disclosed they were engaging with multi-lateral and bilateral partners to raise funds to plug the gap in the budget.
He welcomed the seven months moratorium by the G-20 nations on repayment of loans, as he announced plans to negotiate with China, Kenya’s leading lender, through the Export–Import Bank of China to restructure the country's debt with China.
“We are engaging all donors (bilateral and multilateral partners), the IMF and also World Bank for emergency support. We have space to still to borrow from the domestic money market as well as our development partners to bridge the shortfalls that we have noted in the revenues,” Yatani told the committee yesterday.
A third of all the debt that fall due this year belong to China, with Kenya expected to hand in Sh78.4 billion this year.
Kenya’s debt has risen to Sh6.2 trillion or 58 per cent of the country’s GDP. However, last year Parliament raised the debt ceiling to Sh9 trillion to allow government to buy off expensive loans.
Yatani disclosed that this had been factored in the two financial years of 2019/20 and 2020/21 as new measures to cushion the economy from the Covid-19 shock.
“The reprieve from G-20 is a drop in the ocean, though it’s significant and we appreciate. We will be engaging other partners for a suspension of two years or one,” he said.
The CS told the senators they were also looking at lowering fiscal deficit from the 2016/17 high of 8.9 per cent to 3.5 per cent by 2022/23, reducing commercial borrowing by gradually shifting to concessional loans. It will also shift from Treasury bills to Treasury bonds and cancellation or re-allocation of external loans to priority projects.
Besides the Exim Bank of China, other significant creditors Kenya has are Sh43.3 billion for Trade Development Bank, Italy (Sh8.9 billion), IDA (Sh27.3 billion), Germany (Sh2.9 billion) and Spain (Sh2.2 billion). Others are France (Sh17.5 billion), Japan (Sh5.7 billion) and ADB/ADF (Sh8.1 billion).