Kenya has acquired a commercial loan of $500 million from a syndicate of foreign banks to ease its biting financial crisis after the World Bank approved a $1 billion financing for the struggling economy.
Haron Sirma, director-in-charge of debt management at the National Treasury told The EastAfrican that the government had sought $600 million and had already received $500 million from the syndicate that comprises American Citibank, British Standard Chartered Bank, Stanbic Bank and South Africa’s RMB Holdings Ltd, previously known as Rand Merchant Bank Holdings.
“The balance will come before the end of June, assuming that we would not have gotten money from elsewhere,” he said, conceding that commercial loans were not the preferred source of debt.
“We will always see if we have a good alternative source of financing,” he said.
The news came at a time when the World Bank announced a $1 billion loan to the country, bringing Kenya’s financing from foreign lenders in May to $1.5 billion.
This is part of the $2 billion the National Treasury was seeking between May and June to ease its weakening financial position; help stabilise the shilling exchange rate and bolster forex reserves which have been lingering below the statutory four months of import cover.
The financing is also expected ease the stinging shortage of the US dollar, which has thrown dollar-dependent businesses into operational crisis.
Kenya expects another $410 million from the International Monetary Fund (IMF) in July after the country’s ’authorities and the IMF staff reached an agreement on economic policies and reforms to conclude the fifth reviews of Kenya’s Extended Credit Facility (ECF) and Extended Fund Facility (EFF). The agreement is subject to IMF management approval in July.
The World Bank funding will help economic managers deal with the persistent budgetary shortfalls and ease debt vulnerabilities that have seen the country channel close to 50 percent of its revenue collections to debt repayment.
Kenya’s National debt stands at Ksh9.39 trillion ($68.04 billion), comprising Ksh4.85 trillion ($35.14 billion) and Ksh4.53 trillion ($32.82 billion) external and domestic debts respectively.
This compares unfavourably with the current debt ceiling of Ksh10 trillion ($72.46 billion), which means the room for more borrowing is shrinking faster than expected.
According to rating agency Fitch, Kenya faces increased external debt service obligations of $3 billion this year and $4.8 billion in 2024 as official foreign exchange reserves decline to their lowest in seven years.
Another rating agency, Moody’s, last month downgraded Kenya’s long-term foreign-currency and local currency issuer ratings and senior unsecured debt ratings from B2 to B3 on rising liquidity risks.
Keith Hansen, World Bank Kenya director, however, noted that the government had demonstrated its commitment to fiscal consolidation, which is key for reducing debt vulnerabilities and ensuring long term growth sustainability.
But the Central Bank Kenya has warned that the recent increases in electricity prices, the removal of the fuel subsidy, and a sharp rise in sugar price are expected to exert moderate upward pressure on overall inflation in the country.