Kenya is seeking a precautionary loan of $750 million from the International Monetary Fund (IMF), to serve as buffer against any future shocks. This was revealed by IMF’s resident representative, Armando Morales to Reuters on Monday.
The East African economic giant had last Friday written the lender to make the request. Morales explained that the shocks referred to by Kenya, “could be weather-related. They could be security-related. It could also be a change in foreign investor sentiments affecting capital inflows.”
A series of insurgent attacks that scared off tourists, last year, affected the tourism sector, which is an important source of foreign exchange to the country. The country’s shilling thus weakened last year. The sector’s contribution to GDP has also been reducing since an upsurge in violent terrorist attacks began in 2012. Last year was very bad for the industry, as a series of attacks that led to the death of tourists, including a German and a Russian made several countries to issue travel advisories warning their citizens to steer clear of Kenya.
Morales however said the IMF board would consider the request on February 2. The lender only gives precautionary loans to countries with sound fundamentals and policies, and a track record of implementing such policies. Kenya falls in the category. The country has been granted such in the past to shore up the central bank’s foreign exchange reserves in order to cushion the economy from shocks.
The loan will run for one year with the option for renewal, Morales told Reuters.