COVID-19 exposed Kenya’s debt vulnerability although measures helped – IMF

© Reuters. The Nairobi skyline is seen in the background as a zebra walks through Nairobi National Park near Nairobi

By Omar Mohammed

NAIROBI (Reuters) – COVID-19 has exposed Kenya’s debt vulnerabilities, though official measures, including easing monetary policy, have helped shield the economy from the impact of the pandemic, said Friday evening the International Monetary Fund (IMF).

The Fund said it hoped that an agreement on a new loan facility for Kenya could be presented to its board in early 2021, noting that economic activity in the African country from East was starting to recover despite a downturn in sectors such as tourism.

Measures such as lower interest rates, the possibility for lenders to restructure certain loans, targeted tax cuts and programs to help vulnerable families have “played an important role in cushioning the impact on the economy. ‘economy,’ the IMF said in a statement.

“Kenya’s development goals have nevertheless suffered a major setback … the shock (COVID-19) has also crystallized debt-related vulnerabilities and exposed the weaknesses of some state-owned enterprises,” he added.

Earlier this month, the IMF said it was in talks with Kenya over a new loan facility as the country faced soaring budget deficits made worse by the coronavirus crisis.

The government has stopped pursuing costly commercial debt to curb growing repayments at a time when revenue collection has been crushed by the pandemic.

There is “broad agreement on the key principles that could underpin an IMF-backed program to assist the next phase of the country’s response to COVID-19 and a strong multi-year effort to stabilize and start reducing levels of ‘indebtedness,’ the IMF said.

“The remaining issues to be addressed include the extent of weaknesses (of SOEs) and plans to revise the budget for fiscal year 2020/21 to address them and other pressure points as well as some elements of the medium-term strategy. term, “he added.

Kenyan Finance Minister Ukur Yatani told Reuters on Wednesday that the country plans to join the G20 Debt Service Suspension Initiative and defer around $ 690 million in debt repayments after initially refusing to pay it. make.

This initiative aims to help poor countries overcome the pandemic.

Kenya’s economy shrank 5.7% in the second quarter of 2020 year-over-year, its first quarterly contraction since the global financial crisis 12 years ago, as a lockdown aimed at curbing the spread COVID-19 has slowed economic activity.

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