WASHINGTON
\nKenya has requested rapid financial support from the World Bank to help it manage the economic shocks triggered by the Iran war, its central bank governor told Reuters. Like other nations that are heavily reliant on energy imports, the East African country is scrambling to stave off shortages of essential commodities including petrol, while managing cost increases that could drive up inflation.
\nKenya is the first larger emerging economy to publicly confirm a formal request to the World Bank, although a number of countries, such as Egypt, have said they have approached multilateral lenders. IMF head Kristalina\u202fGeorgieva said that at least 12 countries are seeking assistance from the Fund to cope with the crisis.
\nThe request \u200cfor funds was \u201csignificant,\u201d \u200cKenya\u2019s central bank governor, Kamau Thugge, told Reuters on Thursday on the sidelines \u200cof the IMF and World Bank spring meetings, without providing a figure.
\nAnalysts welcomed the move, saying it will boost confidence and ease market pressure.
\n\u201cWhile Kenya\u2019s external buffers are large and ample, it is among the most exposed countries in the region to the Iran price shock given its oil import dependence,\u201d said Andrew Matheny, senior economist at Goldman Sachs. \u201cRisks to the shilling are tilted toward depreciation, especially in the event of a more protracted shock that implies higher oil prices for longer.\u201d
\nKenya\u2019s dollar bonds rose the most among African issuers on Friday, with the 2034 and 2048 bonds gaining by nearly a cent to be bid at 89.21 and 99.25 cents on \u200cthe dollar respectively, Tradeweb data showed.
\nThe World Bank loan would be \u200cin addition to a budgetary support loan, known as development policy operations, that both sides were discussing before the outbreak \u200cof the crisis, Thugge said.
\nRapid Response Support is a term used by the World Bank for its fast-disbursing \u200cfinancial windows and policy support that helps countries respond quickly to shocks or crises.
\nIn a sign of the risks facing Kenya\u2019s public finances, President William Ruto signed a law on Friday cutting value-added tax on petroleum products to 8 percent from 13 percent for three months to cushion consumers from a surge in crude prices.
\nLast week, the central bank lowered its \u200c2026 growth forecast to 5.3 percent from a previous projection of 5.5 percent, saying the Iran war posed risks to key sectors of East Africa\u2019s biggest economy.<\/p>\n
CLOSE EYE ON CURRENCY
\nKenya\u2019s shilling weakened slightly at the peak of the fighting between the US and Israel and Iran, but has since clawed back most of the losses, Thugge said.
\n\u201cIf there\u2019s pressure …. definitely it will depreciate,\u201d he said, adding that the central bank has enough reserves to curb volatility.
\n\u201cWhat I would say is that depreciation will be orderly. The whole point about why we have been building these international reserves to where they are, to the highest levels, was precisely to be able to avoid excessive volatility.\u201d
\nHard-currency reserves at the central bank stand at above $13 billion, equivalent to 5.8 months\u2019 worth of import cover.
\nKenya\u2019s central bank was pressing ahead with its plan to add gold to its reserves, Thugge said, adding that policymakers were studying domestic gold purchase models that have successfully been used by other countries.
\nAsked about future interest rate moves, Thugge said this would be determined by data in the run-up to June\u2019s policy meeting. The central bank paused its easing cycle at last week\u2019s meeting, opting to hold rates to assess the impact of the oil price shock.<\/p>\n","protected":false},"excerpt":{"rendered":"
WASHINGTON Kenya has requested rapid financial support from the World Bank to help it manage the economic shocks triggered by the Iran war, its central bank governor told Reuters. Like other nations that are heavily reliant on energy imports, the East African country is scrambling to stave off shortages of essential commodities including petrol, while […]<\/p>\n","protected":false},"author":2,"featured_media":542432,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[6],"tags":[],"class_list":{"0":"post-542402","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-world"},"yoast_head":"\n