Advertisement
Kenya, IMF Discuss New Lending 'Insurance' To Cushion Economy
By Duncan Miriri
08/01/2014
NAIROBI (Reuters) - Kenya has asked the International Monetary Fund (IMF) for an "insurance type" facility to cushion its economy from potential local and external shocks, officials from both sides said on Tuesday.
East Africa's biggest economy is at the tail end of a $750 million extended credit facility from the IMF which helped it through the global financial crisis as well as a surge in domestic inflation in 2011.
Kenya plans to start marketing a $1.5 billion Eurobond this month. Plans to launch a Eurobond in 2007 were scuppered first by the global crisis and later by violence, triggered by a disputed election, which killed more than 1,200 people and displaced about 350,000 from their homes.
Officials told Reuters both the IMF and the government were keen on a future lending programme but its form has yet to be defined and it would not be announced before March.
"We are living in a world that is increasingly uncertain," Kenyan finance minister Henry Rotich told a news conference held jointly held with IMF Managing Director Christine Lagarde.
He said the facility could be used to cushion the economy from any future shocks, referring to U.S. Federal Reserve plans to run down a stimulus policy that has encouraged investors to seek higher returns in emerging markets.
Besides the risk of money flowing back out of Kenyan markets, Kenya was also vulnerable to drought at home and high commodity prices in global markets, Rotich said.
"We are still vulnerable just like it happened in 2011," he said, referring to the surge in inflation when the currency nearly collapsed.
"The Treasury is exploring its options with regard to new financing options with the IMF," said Alex Muiruri, a fixed income trader at African Alliance Investment Bank.
The IMF said it expects a current account deficit of 8.4 percent of the gross domestic product in the financial year ending this June.
Lagarde, who was on a two-day tour to Kenya, said the country needed to shore up its foreign exchange reserves to deal with any future external risks.
Add new comment