State mulls Sh117b Covid-19 package to cushion economy

Wednesday, March 25th, 2020 00:00 | By
The National Treasury building. Photo/PD/Alice Mburu
The National Treasury building. PHOTO/Alice Mburu

Zachary Ochuodho @zachuodho

Kenya is banking on a Sh116.9 billion ($1.15 billion) short-term facility from global lenders as an emergency package to sustain the war against coronavirus disease and cushion the country from economic shocks emanating from coronavirus.

The assistance from the International Monetary Fund (IMF) and the World Bank, is expected to come in by the end of April or early May.

 Speaking during a media briefing yesterday, Central Bank of Kenya (CBK) Governor Dr. Patrick Njoroge intimated that already the World Bank has provided $50 million (Sh5.3 billion) to fund the Ministry of Health’s activities in a bid to fight coronavirus in the country.

 He said in addition to that, the government has applied to the IMF for non-conditional emergency assistance totalling  $350 million (Sh37.2 billion) to be channelled towards budgetary support. 

The Governor said the Government has also made a similar request from the World Bank for Sh79.9 billion ($750 million).

This announcement comes on the back of a Sh35.2 billion package, which CBK’s Monetary Policy Committee said will be availed to commercial banks immediately, to support distressed borrowers as a result of the novel coronavirus (Covid -19).

It also follows Sh7.4 billion which the CBK gave to the National Treasury last week to support government’s efforts towards containing the spread of coronavirus. The money was from the mop-up of the old Sh1, 000 banknotes during the demonetisation exercise last year.

 Dr Njoroge said while the extent of the effects of coronavirus on the Kenyan economy is still evolving, it is already evident that the impact will be severe, adding, however, that theTreasury is expected to announce a raft of fiscal measures geared towards reducing the impact soon.

 Lock downs in other parts of the world has seen reduced demand by Kenya’s main trading partners, disruptions of supply chains and domestic production,  resulting in a situation where economic growth is expected to decline significantly in 2020, from an estimate of 6.2 per cent to 3.4 per cent. 

Food prices

Njoroge, however, said lower food prices due to favourable weather conditions, decline in international oil prices and muted demand pressures are expected to keep the overall inflation within the target range in the near term.

 “The fundamental concerns and anxieties centre on the health impact, job losses, and duration of the crisis. The ongoing interventions by the government are aimed at containing the pandemic and moderating the economic and social impact,” he said.

 Globally, there has been a significant strengthening of the dollar largely due to COVID-19 causing jitters among traders in Kenya.

Njoroge also assured traders that there were enough foreign exchange reserves, which stand at $8.251 million which is about 5 months of import cover.

“We appeal to traders to be ethical at this time of crisis. He said the recent weakening of Kenyan shilling was caused by a misunderstanding of the Central Bank’s plan to boost it’s reserved by buying dollars from the market.

The governor said despite disruption of trade in some sectors such as horticulture and tourism, there is also the IMF standby facility to help cushion the country from any unforeseen economic shock.

 A market survey carried out in February shows renewed focus on MSMEs and agriculture, payments of pending bills by the government, the decline in international oil prices, benefits from infrastructure investments, and improved lending to the private sector.

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