Kenya has for the second time in less than six months reached out to the International Monetary Fund (IMF) for budget support to weather the coronavirus economic hardships.
IMF resident representative Tobias Rasmussen said the government has asked the Bretton woods institution for another loan following the $739 million (Sh79.3) billion received in May that Kenya sought to help it respond to the economic shocks caused by the pandemic.
This signals the gravity of the country’s rapidly deteriorating cash-flow situation that is marked by falling revenues and worsening debt service obligations.
Revenue collection underperformed by Sh40 billion in the first two months of the financial year, July and August, amid the coronavirus-related disruptions.
The type of credit Kenya has sought from the IMF is a quick-disbursing facility where money flows straight into the budget to top up the public purse and is used at the discretion of the government.
Under the administration of former President Mwai Kibaki, Kenya kept away from this type of credit, with most of the support from institutions like the IMF and the World Bank coming in the form of project support.
“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 in an e-mail response.
The budget support funding is not tied to specific projects and can be used to fund politically important activities.
This comes amid a spike in Covid-19 cases that has seen infections jump 45 percent to 56,601 over the past month and deaths 42 percent to 1, 027.
According to the Business Daily, this could trigger fresh restrictions from the government, risking reducing economic activity and denying the Kenya Revenue Authority (KRA) opportunities to grow tax collection.