Kenya Seeks $500 Million in Funds to Ease Crisis

Thursday June 11, 2009


Kenya is seeking $500 million in funds to help cushion the economy after the global economic crisis cut exports and foreign investment, Prime Minister Raila Odinga said.

The funds are over and above the $200 million loan that Kenya has secured from the International Monetary Fund, Odinga said in an interview in Cape Town yesterday, where he was attending the World Economic Forum on Africa.

The global recession has curbed Kenya’s foreign currency earnings as exports fell and remittances from Kenyans living abroad declined. Foreign currency reserves of about $2.6 billion cover three months of import needs, compared with the government’s target of four months, Scott Rogers, the IMF’s senior representative in Kenya, said on May 29.

“We are hoping we will get more support at this very critical moment to be able to bridge the gap,” Odinga said. “We seek particularly balance of payments support, which will help us to import” food and other goods.

Kenya has approached the African Development Bank and potential donors such as the European Union to help plug the funding gap, Odinga said. The government would prefer not to raise the money through domestic borrowing because that would have “negative” consequences for interest rates on government debt, he added.

Kenya may also revive a plan to sell bonds to international investors next year, Odinga said. The government in December scrapped plans to sell $500 million of bonds after borrowing costs rose and credit markets seized up. The funds had been earmarked for projects such as power plants and roads.

Tourism Recovery

East Africa’s biggest economy will probably expand between 2.5 percent and 3 percent this year, boosted by a recovery in agriculture and tourism, Odinga said. Growth slumped to 1.7 percent in 2008 from 7 percent in 2007, as the economy was hurt by the global recession and by post-election violence in the first quarter.

Odinga became prime minister last year after signing a power-sharing accord with President Mwai Kibaki to end two months of clashes between ethnic groups after a disputed election. About 1,500 people were killed in the fighting.


Courtesy: Bloomberg