The East African countries look to borrow over $750 million loans to soften the economic impact of the Coronavirus pandemic as Kenya, Uganda, South Sudan, and Tanzania all seek either syndicated loans or special drawing rights from the International Monetary Fund (IMF), as they seek to revive economies experiencing pandemic-induced shocks.
Recently, Uganda became the latest African country to seek a syndicated loan, following Tanzania as the former’s capital launched a $200 million seven-year syndicated facility into the market, led by French lender Société Générale and the Eastern and Southern African Trade and Development Bank (TDB).
Analysts opine that part of it will go into budgetary support as the two banks led Uganda’s last syndicated loan, a $351.8 million 2027 facility signed in March 202 as the country’s move comes less than a month after Tanzania launched a $200 million seven- and 10-year loan facility into syndication in February and aims to potentially increase the deal to $1 billion by December, according to the latest Sovereign Debt Radar by REDD.
Tanzania is keen to keep its investments in infrastructural projects on track and is currently building a high-speed Standard Gauge Railway from the port of Dar es Salaam to the hinterland border with Rwanda, among other projects.
Mark Bohlund, an analyst at REDD Intelligence says Tanzania’s borrowing plans will be disrupted by the demise of President John Magufuli.
In the past four years, the East African country has turned to syndicated loans as it pushes forward with its infrastructural investment programme. In August 2017, it turned to Credit Suisse bank for a $500 million five-year loan and returned to the market two years later to tap the Trade and Development Bank for a $1 billion syndicated loan.
Over the weekend, Kenya received $317.3 million from the International Monetary Fund to weather the economic conditions caused by the pandemic and it is the first disbursement from combined arrangements under the Extended Fund Facility and Extended Credit Facility, which provides for $2.4 billion in low-cost financing over the next three years.
In a briefing after a meeting of the Monetary Policy Committee, Central Bank of Kenya Governor Patrick Njoroge said that “the key element of the programme is to anchor fiscal consolidation through revenue-driven policies”, thereby reduce debt vulnerabilities over the medium term.
Last week also saw IMF approve $174.2 million to South Sudan under the Rapid Credit Facility to help finance the country’s urgent balance of payments needs and provide critical fiscal space to maintain poverty-reducing and growth-enhancing spending.
While the race to the debt markets is likely to offer short-term spending relief to countries in the East African region, it will also contribute to growing concerns about the level of debt in countries, as well as low economic growth.
According to African Development Bank, both Rwandan and Tanzanian economies are projected to grow by 3.9 per cent and 4.1 per cent respectively this year while Burundi and South Sudan economies are forecast to grow by 3.5 per cent and 0.1 per cent respectively in the same period.
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