In order to strengthen its battered financial position and support the shilling exchange rate, which has dropped to a record low – above Ksh130 against the US dollar, Kenya’s National Treasury is asking the Bretton Woods institutions and a group of foreign commercial banks for $1.9 billion in emergency funding.
The funding, which is anticipated within the next eight weeks, is intended to support foreign exchange reserves, which have also fallen below the legal requirement of four months’ worth of import coverage, and to ease a biting dollar shortage that has put businesses that rely on the greenback into an operational crisis.
The new loans include $1 billion from the World Bank, which is anticipated in May; $300 million from the International Monetary Fund (IMF), which is anticipated in June; and $600 million from a syndicate of foreign commercial banks, which is anticipated in June, according to Haron Sirma, a director in charge of debt management at the National Treasury.
The commercial banks are Citibank, Standard Chartered Bank, Stanbic bank and South Africa’s RMB Holdings Ltd, previously known as Rand Merchant Bank Holdings.‘No cause to panic’“All is well… no cause to panic,” said Sirma.
“The current challenges in the global financial markets have exacerbated the liquidity challenges in the global financial markets on revenues and borrowing. We consider this temporary, with pressure easing in the coming weeks.”The declining forex reserves have forced Kenya to change the system through which it purchases oil, from the monthly open tender system (OTS) to long-term government-to-government contracts with Gulf states.
The oil will be purchased on a six-month credit agreement, under which three oil marketers (Gulf Energy, Galana Oil, and Oryx Energies) will sell the commodity to the market in local currencies, with the government hoping to save $500 million each month.
The first batch of oil under the deal landed at the Mombasa port this week from the United Arab Emirates.“Debt maturities will decline significantly over the next eight weeks; the month of April will be a revenue boom as corporates declare dividends and taxes, and large external inflows from Bretton Woods,” added Sirma.