The executive board of the International Monetary Fund (IMF) has extended the limit increase on members’ cumulative access to funds, allowing more borrowing headroom for countries such as Kenya, which are on the brink of breaching the normal limit.
The multilateral lender had last year increased the limits for cumulative access to 600 per cent of quota, up from the normal 435 per cent, and the annual limit from 145 percent to 200 per cent.
Quotas refer to a country's share of IMF's resources, with the estimate for Kenya standing at an equivalent of about Sh100 billion.
“The board noted at the time that an extension of the temporary increase could be appropriate, if circumstances warranted, and should be considered before the expiration of the 12-month period,” the lender said in a statement on Tuesday.
This extension will allow countries such as Kenya, which are on the brink of bursting the normal limit, access more IMF financing to continue supporting foreign exchange reserves amidst the economic uncertainties and difficulties facing them.
The limit caps the maximum amount of loans countries can access from the IMF, and it is normally more than the Special Drawing Rights (SDR) — IMF’s currency, which is derived from an average of multiple currencies — quota they can access from the IMF, both annually and cumulatively.
All countries are allowed to draw up to 435 per cent of their quota cumulatively, and 145 per cent every year. Kenya has accessed SDR2,051.79 million (Sh378.5 billion), which is 378 per cent of the quota, leaving it with a headroom of only SDR309.4 million (Sh57.05 billion).
With the extension, Kenya will now be able to access up to 600 per cent of its quota, which translates to SDR3,256.8 million (Sh600.8 billion) in concessional financing, aside from other special arrangements such as the Resilience and Sustainability Facility, which helps during emergencies.
In the East African region, Kenya is the closest to breaching the limit, with some countries like Somalia and Burundi having utilised just 44 per cent and 67 per cent of their quotas respectively.
Uganda has utilised 250 per cent, Tanzania 186 percent, Rwanda 165 per cent, Democratic Republic of Congo 135 per cent and South Sudan 100 per cent, meaning they are all a long way from the 435 per cent limit.
The quotas are determined by a country’s gross domestic product, openness, variability, and reserves, according to the IMF.
Following complaints from African countries that the limit is too restricting for them, the multilateral lender is set to review the limits in July next year, allowing countries like Kenya to access even more financing.
