The East African coronavirus (COVID-19) battle has been fortified with $1.23 billion from the International Monetary Fund (IMF).
Both Kenya and Uganda have so far confirmed more than 600 cases of the virus.
COVID-19 Funding in Kenya
According to the IMF statement, on Wednesday the IMF Executive Board approved the disbursement of SDR542.8 million (100 per cent of quota, about US$739 million) to be drawn under the Rapid Credit Facility (RCF).
“This will help to meet Kenya’s urgent balance of payments need stemming from the outbreak of the COVID-19 pandemic,” The statement read in part.
The impact of COVID-19 on the Kenyan economy will be severe. It will act through both global and domestic channels, and downside risks remain large.
The Kenyan authorities have taken decisive action to respond to the pandemic’s health and economic impacts, the sudden shock has left Kenya with significant fiscal and external financing needs. Authorities have committed to resume their fiscal consolidation plans once the crisis abates to reduce debt vulnerabilities.
However, the statement noted that Mr Tao Zhang, Deputy Managing Director and Acting Chair, said that “The COVID-19 pandemic has delivered a large economic shock to Kenya. The pandemic has impacted nearly all facets of the economy—particularly tourism, transport, and trade—and led to an urgent balance of payments and fiscal financing needs,”
The statement highlighted that the funding “will liquidity support to help Kenya cover its balance of payments gap this year. It will provide much-needed resources for fiscal interventions to safeguard public health and support households and firms affected by the crisis. It will also catalyze necessary financing from other donors”.
Also, the IMF cited that the Central Bank of Kenya has rather taken measures to maintain sufficient liquidity in the financial sector, and further added that “t should continue to stand ready to further support the economy and the financial sector’s health, as necessary while ensuring that policy decisions are data-driven”
However, the COVID-19 resources allocated are also slated for independent post-crisis auditing, which its results will be published.
IMF funding in Uganda
According to the lender’s statement, the Executive Board approved the disbursement of about US$491.5 million or 100 per cent of quota for Uganda under the Rapid Credit Facility (RCF). It will help finance the health, social protection and macroeconomic stabilization measures, meet the urgent balance-of-payments and fiscal needs arising from the COVID-19 outbreak and catalyze additional support from the international community.
The Ugandan economy is hurt, particularly in several key sectors such as sectors as services (tourism), transport, construction, manufacturing and agriculture. The IMF argues that challenging external environment is curtailing remittances and foreign direct investments. The pandemic has also exacerbated the challenges posed by heavy rains in early 2020 and the ongoing locust invasion.
However, health spending has been intensified in the country to contain the virus, and protect the most vulnerable groups in the nation. Hence, according to the statement the Bank of Uganda has reduced interest rates and provided liquidity to safeguard financial stability while maintaining exchange rate flexibility.
Also, the lender deputy managing director was noted on different angles in the statement saying “The global COVID-19 pandemic is expected to severely hit the Ugandan economy through several channels, with detrimental effects on economic activity and social indicators. The external and fiscal accounts are expected to deteriorate, creating substantial urgent external and fiscal financing needs,”
Hence, the IMF chief added that “despite a temporary worsening of debt indicators and heightened vulnerabilities, public debt is expected to remain sustainable. The authorities remain committed to ensuring debt sustainability, including through their efforts to enhance revenue collection and strengthen public investment management.”
“The authorities are committed to managing transparently the resources received and will strengthen transparency and accountability. They plan to report separately on the use of the funds, undertake and publish an independent audit of crisis-mitigation spending and publish large procurement contracts,” the statement quoted Zhang in part.
Also, the disbursed loans make a total of more than $10 billion the IMF has already disbursed to African nations to help them combat the virus.