Kenya in talks for new multilateral financing, says central bank

Kenya is in discussions with several multilateral development banks to secure new financing that is expected to materialise this financial year, its central bank governor said on Friday.

Governor ​Kamau Thugge said the government was in talks with the African Development Bank and the World Bank over potential budget support, including a World Bank Development Policy Operation (DPO).

“They are looking at all kinds of financing … there are quite a number of sources that they are trying to access,” Thugge said in an interview on the sidelines of ​the annual meetings of the IMF ⁠and World Bank in Bangkok.

“Between now and June of next year is when that external financing will be expected.”

A debt-for-food swap is among the options being considered by the East African nation, Thugge said, without giving further details as he was not directly involved in the discussions.

Reuters reported last month that Kenya ‌is expected to receive about $400m (R6.57bn) in emergency financing from the World Bank to help address risks including an Ebola outbreak in the region and El Niño-related disruptions.

An IMF team is expected to visit Nairobi in December for a regular Article IV consultation mission, Thugge said, adding that a new programme with the fund would be part of the discussions.

“The IMF funding is not in any of our planning. But obviously, were it to come in, it would help in several ways,” said Thugge.

“It’s cheaper than the alternative financing, especially domestic financing. It’s concessional … and two, it also reduces the government’s recourse to domestic borrowing, and maybe that can also help banks lend to the private sector a bit more.”

Thugge said there was still “enough time” to monitor developments in consumer price pressures, the Middle East war and weather conditions before deciding on its next rate move.

The central bank last week maintained its benchmark lending rate at 8.75% for the fourth policy meeting in a row, saying it saw inflation staying within its target range in the short term.

But the country’s energy regulator raised the maximum retail prices of petrol and diesel earlier this week, citing higher import costs linked to the Middle East conflict.

Thugge said rising bond yields across developed markets could also contribute to inflationary pressures indirectly, by weighing on the domestic currency.

“Even if there is an increase in the fuel [prices], the food prices have actually been trending downward, so one will still need to wait and see what happens to the food prices, and does the decline in food prices offset whatever increase there might be on fuel inflation.”