March 24, 2020 / 9:43 AM / in 16 days

UPDATE 2-Kenya to seek IMF help, pay arrears and speed tax refunds

(Adds world bank loan, flexible rules for banks’ bad debts)

By Duncan Miriri

NAIROBI, March 24 (Reuters) - Kenya’s government plans to seek help from the International Monetary Fund, pay pending bills to suppliers and quickly process company tax refunds to support the economy in the face of the coronavirus crisis, officials said.

Patrick Njoroge, the central bank governor, told a news conference on Tuesday that the government is seeking emergency assistance from the IMF of up to $350 million.

“This is assistance that doesn’t have the conditionalities of programmes ... a lot of this could be directed towards budget support,” Njoroge said, adding that $750 million will be sought from the World Bank.

It was not immediately clear whether the governor was including a World Bank loan of between $500 million and $1 billion it was reported to be seeking in January.

Kenya has 25 confirmed cases of COVID-19 and the disease is hurting crucial tourism and farm exports.

The government expects revenue collection to be hit as both imports and domestic consumption slow, Finance Minister Ukur Yatani told Reuters late on Monday.

“We are looking at underperformance as a result of just COVID-19, of about 70 billion (shillings) ... in terms of revenue for the remaining three months (of this financial year),” he said, adding that the situation was evolving fast.

Yatani said the government would shift planned spending towards urgent development projects.

It plans to release 49 billion shillings ($460 million) to suppliers for unpaid bills and expedite payment of close to 10 billion shillings in value-added tax refunds to businesses in the next two to three months, he said.

The World Bank is making $60 million available to Kenya’s health sector to help it to deal with the outbreak.

President Uhuru Kenyatta, who has been meeting business executives, said on Monday that fiscal stimulus measures would be announced this week.

Kenya’s central bank has already implemented stimulus measures, cutting interest rates by a larger than expected 100 basis points on Monday and reducing the amount of cash that banks are required to hold as reserves.

It is also allowing borrowers to restructure loans if they encounter difficulties because of the outbreak.

Njoroge said on Tuesday that the central bank will offer banks flexibility with the classification and provisioning of bad debts that were performing on March 2 but were subsequently restructured because of the outbreak.

Yatani said the government and companies were seeking new sources of raw materials imports to keep industries going during the crisis.

“We already have challenges with the inflow of (materials) inputs,” he said, adding that they are either delayed or not arriving as required. ($1 = 106.6000 Kenyan shillings) (Additional reporting by Omar Mohammed Editing by David Goodman)

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