Kenya seeks IMF nod to use $4.6bn World Bank Covid loan
Kenya is asking for spending cap waivers from the International Monetary Fund (IMF) to use the Sh14.6 billion World Bank vaccine loan without breaching the deficit agreed with the multilateral lender.
Kenya’s fiscal deficit averaged 7.6 percent between June 2013 and June 2020 against a target of 4.0 percent but now the IMF has put stiff targets including the amount Kenya can borrow to finance the gap under the 38-month programme.
The programme, however, offers flexibility to address social and emergency spending with the approval of the multilateral lender.
Kenya signed the vaccine deal with the World Bank in June but the lender is yet to disburse the loan saying the billions of shillings will be released to the Treasury once Kenya meets certain undisclosed conditions.
IMF Article IV documents, review of government accounts that led to the release of the additional Sh29 billion this month shows that the multilateral lender’s approval was necessary for the government to spend the cash.
“The flexibility built into the programme conditionality caters to this need by allowing Kenya to execute its Covid-19 vaccination programme without facing undue constraints,” Treasury told the IMF.
“We thus request modification of the end-June 2022 ceiling on the primary balance to accommodate the use of the Covid-19 related resources made available from the World Bank ($130 million),” Treasury said.
The World Bank and the IMF are playing a role in shaping policy that would require the government to implement tough conditions across many sectors.
The conditions come on the back of their multi-billion shilling loan facilities to Kenya where money flows straight into the budget to top up the public purse.
Under the administration of former President Mwai Kibaki, Kenya kept away from this type of credit, with most of the support from institutions like the IMF and the World Bank coming in the form of project support.
Kenya has recently faced a deteriorating cash-flow situation, marked by stagnant revenues, worsening debt service obligations, and the effects of the Covid-19 pandemic.
Kenya is banking on the World Bank loan to speed up its vaccine programme to inoculate the entire adult population by end of next year.
The loan would allow Kenya to buy vaccines to complement the COVAX programme and bilateral donations to support the vaccination programme would help move Kenya even closer to its objective of vaccinating 10 million people by end-2021 and all adults by end-2022.
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The government has received 23.2 million doses of Covid-19 vaccines and has inoculated 8.9 million adults out of 47 million Kenyans.
About 5.3 million Kenyans have had a first jab and only 3.5 million are fully vaccinated, according to the Ministry of Health.
The World Bank financing will help Kenya buy vaccines through an African Union facility set up for that purpose, as well as through COVAX, the global scheme for sharing vaccines equitably.
The cash will also be used to boost Kenya’s cold chain facilities for storage of vaccines, training of health personnel and other associated activities.
Kenya requires Sh34 billion to ship in 36 million doses of Covid-19 vaccines by June next year when it expects to have 16 million people inoculated.
Donors will provide Sh20 billion, leaving Kenya to seek Sh14 billion from taxes and donors like the World Bank.
COVAX, which is led by the GAVI vaccines alliance along with the WHO and other partners, aims to deliver over 1.3 billion doses to 92 lower- and middle-income countries, covering up to 20 percent of their populations.
Kenya will offer the Covid-19 vaccine shots free of charge to its citizens, but will pay $7.70 (Sh853.70) per shot of the vaccines as negotiated under the COVAX facility.
