NAIROBI (Reuters) - Kenya has requested a loan of up to $100 million from the International Monetary Fund (IMF) to cushion its currency from global economic downturn and help counter a severe food crisis, the body’s resident representative said on Tuesday.
Official forex reserves in Kenya’s central bank declined to $2.6 billion, equivalent to 3.13 months of imports, from $3.3 billion or 4.75 months of imports in the year ago period, according to the bank’s statistics.
Like other nations across the world, Kenya has been feeling the heat from the global financial crisis, but it has been hit harder than most because the crisis slowed its recovery from deadly post-election violence early last year.
The east African nation is also facing a drought that has left about 10 million people in need of food aid.
“What we are exploring right now is ... to make available to Kenya as much as $100 million,” Scott Rogers told Reuters in a telephone interview.
He said they are hoping to forward Kenya’s proposal to the IMF board by early April.
“Once the board approves the government’s request, disbursement occurs in a matter of days. That will be late April, early May,” said Rogers.
Rogers said the money will augment the central bank’s hard currency reserves.
“This will allow the country to support a high level of importation without putting as much pressure on the exchange rate as would otherwise occur without funding,” he said.
He said the crisis that began in major developed economies was hurting the whole sub Saharan region.
“We are already seeing the impact of the (global) crisis on Kenya’s stock market and exchange rate,” he said. “We are expecting growth in most sub Sahara African countries to be about half what we saw in 2007. All countries will be affected,” the resident representative said.
Kenya’s shilling was hit hard last year by the global financial crisis, a higher import bill due to rising commodity prices and the importation of maize after harvests were destroyed and planting disrupted in the post-election crisis.
It has remained under pressure so far, slipping to a four-year low last week on news of a 27 percent drop in the amount of hard currencies sent home by Kenyans abroad in January.
Rogers said the currency is likely to hold its own against the dollar in future, barring any unforeseen risks.
“The prospects of the stability of the Kenya shilling are good. There may be additional pressures out there. Right now we are not seeing them. They could emerge on factors not under Kenya’s control,” he said.
Rogers said the terms of the concessional loan would be a 5-year grace period and a 10-year repayment time.
Editing by Ruth Pitchford