The International Monetary Fund has extended $1.2 billion in emergency funding to Kenya and Uganda to respond to the coronavirus pandemic that is wreaking havoc to economies.
Disbursed under the Rapid Credit Facility, Kenya will receive $739 million to help it meet urgent balance of payments needs stemming from the pandemic that has left the country with significant fiscal and external financing needs and disrupted plans for fiscal consolidation.
The Kenyan facility carries a zero per cent interest rate, a grace period of 5.5 years and a final maturity of 10 years.
Uganda is set to get $491.5 million to finance health, social protection and macroeconomic stabilisation measures beside addressing balance of payments and fiscal needs.
“The Covid-19 pandemic has delivered a large economic shock to Kenya. The pandemic has impacted nearly all facets of the economy and led to urgent balance of payments and fiscal financing needs,” said Tao Zhang, IMF deputy managing director.
He added the financing will deliver liquidity support to help Kenya cover its balance of payments gap and provide resources for fiscal interventions to safeguard public health and support households and firms affected by the crisis.
Kenya has witnessed a significant surge in Covid-19 cases that by Wednesday stood at 582 with 26 deaths and 190 recoveries while in Uganda total positive cases stood at 100 with 55 recoveries.
Across the two neighbours, the pandemic has had adverse impacts on key sectors of the economy particularly trade, tourism, transport, construction, manufacturing and agriculture.
Apart from also curtailing remittances and foreign direct investments, the pandemic has weakened economic conditions and exerted significant pressure on revenue collection, expenditure, reserves and the exchange rate.
In Kenya, the National Treasury has been forced to lower revenue target in the current fiscal year to $17.6 billion from $19.3 billion comprising $15.2 billion in ordinary revenue and $2.3 billion as appropriations-in-aid.
Last month the Central Bank of Kenya cut the base lending rate to seven per cent from 7.25 per cent while the Bank of Uganda reduced the benchmark rate to eight per cent from nine per cent announced in February.