The government paid Sh273 million in interest for the standby loan to the International Monetary Fund by June last year.
According to CBK this was almost double the Sh138 million in interest payment for the loan that has never been disbursed.
In February 2015 after Kenya’s entry into the commercial loans market, the country borrowed $688.3 million precautionary loans would ‘mitigate the impact of shocks if they materialize’
“The economy remains vulnerable to shocks arising from Kenya’s growing integration into global markets, security concerns, and extreme weather events,” said Naoyuki Shinohara, deputy managing director and acting chair of IMF executive.
Kenya had to go back to the IMF in March 2016 for an even bigger cushion debt of $1.5 billion almost three times the size it had requested a year earlier.
The funds comprise a standby arrangement worth about $990 million and a standby credit facility worth about $495 million.
The International Monetary Fund (IMF) will be reassessing whether to extend the two-year standby facilities for Kenya which set to expire in March.
This money is important if Kenya should survive when an unforeseen shock that requires dollars, for instance, a sharp rise in oil prices, massive dollar outflows to the volatile dollar against our forex reserves.
The loan also comes with conditions including reduction of the wage bill which may force the government to fire public servants.