“Many people fear venality tendencies but when you consider this is supposed decipher the economic crisis the country is facing amidst the lock down.” Fredrick Senkeeto, Ndejje University Lecturer speaking to HICGI News Agency
Rice did not name all the countries that have emergency requests pending. But replying to questions, he said the Fund’s staff was considering requests from Sri Lanka, South Africa and Zambia. He did not provide the amounts they had requested. The aid granted under the IMF’s rapid financing initiatives comes without the usual conditionality, but the Fund is working to ensure transparency and prevent corruption by asking all recipient governments to commit to enhanced reporting of crisis-related spending and undertake audits, Rice said. He said the funds were also subject to the IMF’s safeguards assessment policy, under which a central bank’s framework of governance reporting and controls must be deemed sufficient to manage resources, including IMF disbursements. Rice said the Fund was also in discussions with Zimbabwe, which has cleared its arrears with the Fund but is not currently eligible for IMF assistance since it has arrears with other financial institutions and bilateral creditors, Rice said.
“Beyond the issue of arrears, consideration of any future request would
require Zimbabwe to be ready to implement strong macro policies, and structural
reforms,” he said. “We do recognize the dire circumstances facing the
people of Zimbabwe, and we’re providing technical assistance right now.”
An IMF team will begin discussions next week with Lebanon, another country that
has run into debt sustainability issues, on the details of its economic reform
plans, Rice said.
He said IMF Managing Director Kristalina Georgieva viewed Lebanon’s plan as
an important step forward to address its economic challenges and identify key
areas for reforms to restore external and public debt sustainability. Rice said
the IMF was also in talks with Argentina and Ukraine.
• Kenya’s $739 million to partly help cushion households, firms
• Uganda gets $491.5 million to meet fiscal financing needs.
The International Monetary Fund approved $1.23 billion of emergency funding
for Kenya and Uganda, saying the coronavirus pandemic is likely to exact a
severe toll on the two East African economies.
The loans bring to more than $10 billion the IMF has disbursed to African
nations to help them combat the virus. Kenya’s government is negotiating with
bilateral and multilateral creditors to delay debt-service
payments due this year as it shores up funds it needs for health-care.
Those discussions are taking place as the Institute of International Finance
coordinates talks
on debt relief for emerging markets.
The IMF’s $739 million Rapid Credit Facility will boost Kenya’s
international reserves to help cover balance of payments shortfalls this year.
It will also provide resources to boost public health and support for
households and companies hit hard by the crisis, the IMF said in an emailed
statement. The 10-year facility carries no interest and has a 5½-year grace
period.
“The impact of Covid-19 on the Kenyan economy will be severe,” the IMF said.
“The sudden shock has left Kenya with significant fiscal and external financing
needs.”
The pandemic has damaged almost all sectors of the region’s biggest economy.
Agriculture, which accounts for about a third of overall output, has been hit
hard with a plunge in the export of cut flowers, fruits and vegetables. Tourism,
the third-biggest foreign-exchange earner after remittances and farm shipments,
has dried up.
While the move to pause fiscal-consolidation plans amid the pandemic is
appropriate, the IMF urged Kenyan authorities to pursue growth-friendly
measures, such as strengthening revenue collection, once the crisis subsides to
reduce debt vulnerabilities.
Temporary Measures
Authorities should also continue to “allow the exchange rate to act as a
shock absorber,” the IMF said. The Central Bank of Kenya enabled the shilling
to depreciate to a record low of 107.65 per dollar on April 24, bringing losses
from the start of the year to 5.5%.
Kenya’s reserves will climb to about $8.48 billion with the fresh cash,
which will help with debt obligations that are due, such as interest payments
on some Eurobonds, according to Churchill Ogutu, head of research at
Nairobi-based Genghis Capital.
“We don’t price in large-scale shilling support by the apex bank in light of
the ‘go-ahead’ from the IMF that the exchange-rate adjustments can act as a
shock absorber,” Ogutu said. “That said, IMF support is a positive news event
that will also anchor an upswing in the price of the international sovereign
bonds in the near-term.”
In Uganda, where strict surveillance measures have helped limit the spread
of the virus, the pandemic has added to the challenges posed by heavy rains and
an ongoing locust invasion, the IMF said. As in Kenya, a temporary widening of
the fiscal deficit is justified to allow for a response against the crisis, it
said.
“Despite a temporary worsening of debt indicators and heightened
vulnerabilities, public debt is expected to remain sustainable,” the IMF said
as it announced a $491.5 million loan to Uganda.
Africa’s biggest coffee exporter had public debt of $13.5 billion at the end
of 2019 and foreign creditors accounted for about 65% of that. The government
projects a budget deficit at 8.7% of gross domestic product by the end of June.
The World Bank estimates Kenya’s public debt will increase to about 6.4
trillion shillings ($60.3 billion) this fiscal year, or 63.1% of GDP, from 5
trillion shillings four years ago, when it was equivalent to 53.8% of GDP.
In an Interview with HICGI News Agency Fredrick
Senkeeto a Lecturer at Ndejje University, portrays mixed reaction on IMF
funds to developing countries like Uganda.
Senkeeto says Ugandans still have to wait to see if it’s executed and
allocated properly for the benefit of nationals; “Many people have become cynical
because they see several funds misallocated- the 10 billion shillings for Members
of Parliament in guise of fighting COVID was controversial.” He adds that many
people fear venality tendencies but when you consider this is supposed decipher
the economic crisis the country is facing amidst the lock down.
He believes that the impact has to be realized when the economy opens and
people get back to work as no serious economic activity is prevailing now.
“This money is supposed to be injected in the economy to be vibrant in spite
of what’s going on, but let’s wait and see if it will be productive.” Senkeeto emphasizes.
Only time will tell where this fund will have gone to.
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