Kenya's neighbours Rwanda and the Democratic Republic of Congo are among the first debt relief beneficiaries of the International Monetary Fund (IMF) after the multilateral lender approved this year's loan interest payments waivers for 25 countries.
Kenya, which is classified as a lower middle-income country, has recently joined mounting calls to rich nations like China and Group of 20 (G20) countries to hold off debt interest payment this year for poor and developing nations amid worsening economic fallout from the Covid-19 pandemic.
The country is not named in the list, in which 19 African countries are beneficiaries.
“Today, I am pleased to say that our Executive Board approved immediate debt service relief to 25 of the IMF’s member countries under the IMF’s revamped Catastrophe Containment and Relief Trust (CCRT) as part of the Fund’s response to help address the impact of the Covid-19 pandemic," said IMF managing director Kristalina Georgieva in a statement.
“This provides grants to our poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months and will help them channel more of their scarce financial resources towards vital emergency medical and other relief efforts."
African countries that will receive debt service relief under the deal are Benin, Burkina Faso, Central African Republic, Chad, Comoros, DRC, The Gambia, Guinea, Guinea-Bissau, Liberia, Madagascar, Malawi, Mali, Mozambique, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone, and Togo.
Other countries are Afghanistan, Haiti, Nepal, Solomon Islands, Tajikistan, and Yemen.
The IMF boss said the Bretton woods institution is mulling more waivers based on capacity and support from developed nations which are its key funders.
“The CCRT can currently provide about $500 million (Sh52.9 billion) in grant-based debt service relief, including the recent $185 million (Sh19.6bn) pledge by the UK and $100 million (Sh10.6bn) provided by Japan as immediately available resources," she said.
"Others, including China and the Netherlands, are also stepping forward with important contributions. I urge other donors to help us replenish the Trust’s resources and boost further our ability to provide additional debt service relief for a full two years to our poorest member countries.”
Kenya is among Africa's heavy borrowers accumulating a huge portfolio especially due to lending from China to fund infrastructure projects.
The country recently backed calls for debt interest payment waivers during a virtual meeting of African presidents led by South African President Cyril Ramaphosa to discuss the coronavirus response.
During the teleconference, in which nine presidents including President Uhuru Kenyatta took part, the leaders heightened calls for interest waivers arguing money to service the loans will do a great deal to provide social services to tackle the pandemic.
Should the debt payment freeze be accepted, Kenya stands to keep hold of up to Sh243 billion in deferred payments to both bilateral and commercial lenders.
"As part of efforts to mitigate against the adverse effects of the global coronavirus pandemic, African governments will unite in pushing for loan waivers," State House tweeted following the virtual meeting.
Economists expect measures to rein the Covid-19 pandemic to lead to a sharp economic slowdown impacting on Kenya's ability to raise revenue locally and finance the debt repayment.
The World Bank has projected Sub-Saharan Africa will this year suffer its first recession for 25 years as a consequence of the outbreak.