Kenya's $680 million standby credit with the International Monetary Fund has been extended to March as both sides work on a new facility with similar features, the IMF's resident representative said. The East African nation secured the year-long, insurance-type loan in February last year to help it deal with any unforeseen shocks that could threaten economic stability.
"We are now working on extending it for a few weeks just because we are in dialogue with the government to present a new programme to our board before the end of this quarter," Armando Morales told Reuters late on Monday. "We agreed with the authorities that it was prudent to maintain that insurance during the discussion for the new programme," he said.
The Central Bank of Kenya calmed volatility in the markets last year after hiking its benchmark lending rate by 3 percentage points to 11.50 percent and has increased foreign reserves without turning to the IMF standby loan. The shilling weakened 11 percent against the dollar last year, less than most frontier currencies, and has been steady this year. Morales said this showed the government had "the will and the tools necessary" to maintain stability in the economy, strengthening the case for a new standby loan.
The IMF expects Kenya's economy to grow by 6 percent this year, from an estimated 5.6 percent last year, driven by farming, expectations of macroeconomic stability and Kenya's minimal exposure to slowing emerging markets like China. Unlike some other African nations, Kenyan is not reliant on commodity exports to Asia.
"Agriculture has become a more dynamic sector. Weather patterns have been more benign," Morales said, adding higher growth could be achieved because of infrastructure projects like a new railway being built from the main port to the capital. The IMF was following closely the government's financing plans given the slowdown in global economic growth, he said.
Kenya's net present value of debt - which reflects the debt's maturity profile, the proportion of loans taken on softer terms like those from the World Bank and interest rates - was still below 45 percent of GDP, he said. "Kenya remains at low risk of debt distress even with the additional information that has been incorporated," he said.
Finance Minister Henry Rotich said last week Kenya was looking to cut spending and would keep engaging international investors to gauge appetite for future issuance. Morales said Kenya needed to balance local and external funding sources in the future but said it could still tap foreign markets. "That appetite hasn't dried completely. There are still pockets of investors that are looking for yields," he said. The yield on Kenya's debut Eurobond that was issued in 2014 was quoted at 9.096 percent on Tuesday, compared with a yield of 6.875 percent at issue.
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