Sigh of relief as IMF backs Kenya’s ability to borrow Sh130b

International Monetary Fund (IMF) has indicated that the Treasury has a headroom to borrow up to Sh130 billion to boost investor sentiment and allay fears of a cash crunch ahead.

Kenya which faces tough times ahead with a Sh246 billion Eurobond whose maturity comes up in June next year, enjoys a strong rapport with the New York based-Fund whose top officials visited Nairobi last week. Fund Managing Director, Kristalina Georgieva said the organisation has a very strong programme with Kenya that it is financing now and intends to expand by deploying a new long-term concessional financing instrument.

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“We have created the Resilience and Sustainability Trust and there will be a team here on the week starting May 7 to work on that”, she told the media.

The maximum amount that a nation may receive from the Resilience and Sustainability Facility is equal to the lesser of 150 per cent of its quota or one billion SDRs. Thus, if Kenya were to obtain finance under this window, it would be qualified to receive up to $1.1 billion, or around Sh150.1 billion at the current exchange rate, in new IMF funds.

Payback time frame for payments made from the IMF’s Resilience and Sustainability Facility is normally 20 years, with a grace period of 10.5 years before principal repayment begins.

A country must have an ongoing IMF-supported programme, such as Kenya’s ongoing 38-month, $2.41 billion programme under the Extended Credit Facility and Extended Fund Facility agreements, in order to be eligible for funding under the Resilience and Sustainability Facility.

Georgieva says during her visit to the country last week, she met with President William Ruto and members of the Cabinet and discussed the country’s difficulty accessing the international financial markets due to the current tightening circumstances.

Kenya also got over Sh300 billion loan from Afrexim Bank according to media reports. The Treasury also got over Sh9 billion from African Development Bank helping to ease liquidity in the coming and perhaps lifting investor sentiment.

The country is facing the prospect of flattening the yield curve, meaning that short borrowing was becoming unsustainable even as long-term yields stay high which could raise the possibility of a default.