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Maturing debts: Treasury urged to renew IMF stand-by loan

Martin Mwita @PeopleDailyKE

The National Treasury should reopen negotiations with the International Monetary Fund (IMF) for a new stand-by loan to cushion the economy ahead of this year’s maturing debts and borrowing plans, analysts at Stanbic Bank have advised.

This comes as the country contemplates on issuing a new Eurobond, unrelented by foreign investors who have slapped a risk premium on  international borrowing.

Debts maturing before the end of this year financial year (before June 30), include a syndicated loan of $787 million (Sh80 billion) owed to Standard Chartered Bank, $783 million (Sh79.6 billion) sovereign bond, a $372 millios (Sh37.8 billion) Trade Development Bank syndicated loan and an International Development Association loan of $146 million (Sh14.8 billion).

Grace period

The country will also commence repayment of the Standard Gauge Railway (SGR) in July after the lapse a five-year grace period.

Kenyans will further part with more than Sh97.71 billion this year to repay the first Sh202 billion Eurobond which matures in June, with all these obligations likely to dent the country’s Forex reserves.

“Given the upcoming external debt refinancing obligations in the first half of this year, it will be key for the authorities to rekindle their relationship with the IMF and sign a new facility programme,” said Jibran Qureishi, Stanbic Bank Regional Economist-East Africa.

He was speaking during this year’s Stanbic Bank Kenya 2019 Economic Outlook presentation, where the lender has projected the economy would grow by six per cent this year.

Economic shocks

The government had secured a six-month extension on the facility in March 2018, but by the time of its withdrawal, Treasury CS Henry Rotich insisted that the country was well-prepared for any economic shocks.

Foreign investors’ risk perception of the country is said to have increased after IMF withdrew the $1.5 billion (about Sh152.6 billion) stand-by loan last year. The facility had been in place since 2016 to cushion the economy in case of unforeseen external shocks.

Central Bank Governor Patrick Njoroge backed Rotich “saying the economy is well protected against capital outflows and does not need the precautionary credit facility”.

Treasury is understood to be in talks with the IMF for a new facility after it rejected more reviews past the September 14, 2018 expiry date.

IMF has been pushing for reforms in the country among them a review of the interest rate cap which has led to a credit crunch in the private sector.

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