Following the World Bank's approval of a $1 billion loan for the faltering economy, Kenya has obtained a commercial loan from a syndicate of global banks for $500 million to relieve its acute financial crisis.
The syndicate, which consists of American Citibank, British Standard Chartered Bank, Stanbic Bank, and South Africa's RMB Holdings Ltd, formerly known as Rand Merchant Bank Holdings, provided the government with $500 million in response to its request for $600 million, according to Haron Sirma, director-in-charge of debt management at the National Treasury.
“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 added.
The announcement of the loan by the World Bank, which brought Kenya's funding from foreign lenders in May to $1.5 billion, coincided with the release of the news.
This is a portion of the $2 billion the National Treasury sought between May and June to improve its deteriorating financial situation, stabilize the value of the shilling, and boost foreign exchange reserves that have been lagging behind the required four months of import coverage.
The finance is also anticipated to lessen the sharp US dollar shortage, which has put enterprises depending on the US currency in an operating dilemma.
Following an agreement on economic policies and reforms to finalize the fifth review of Kenya's Extended Credit Facility (ECF) and Extended Fund Facility (EFF), the country's government and the IMF staff anticipates receiving another $410 million from the IMF in July. The IMF management must approve the accord in July.
The support from the World Bank will assist economic managers in addressing ongoing budgetary gaps and reducing debt vulnerabilities that have forced the nation to devote over half of its tax receipts to debt service.
The total national debt of Kenya is Ksh9.39 trillion ($68.04 billion), which is made up of Ksh4.53 trillion ($32.82 billion) in domestic debt and Ksh4.85 trillion ($35.14 billion) in external debt.
This is a poor comparison to the present debt cap of Ksh10 trillion ($72.46 billion), indicating that there is less room for borrowing than anticipated. Kenya's external debt service obligations will rise by $3 billion this year and $4.8 billion in 2024, according to rating agency Fitch, as the country's official foreign exchange reserves fall to their lowest level in seven years.