The South African government has asked the International Monetary Fund (IMF) for $4.2 billion. The money would come from a facility that provides financing to countries



facing an urgent balance of payments need, without the need to have a full-fledged program in place.



According to the IMF managing director this means that the recipient can spend the money freely but should keep the receipts. Nevertheless, reports that South Africa has been negotiating a letter of intent with the IMF suggests that at least part of the financing will be linked to tougher IMF conditionalities.



The letter of intent is a letter from the government to the IMF in which it sets out the policies that it intends to implement to correct the macro-economic problems that caused it to seek IMF support. The IMF board decides to provide a country with financing on the basis of this letter. Its contents are the core of the conditionalities attached to IMF financing.



South Africans will learn the actual terms of the IMF financing at the end of July when its board of directors considers the country’s request for financial assistance.



But many have already made up their minds about this transaction. Some see it as a humiliating defeat in which the country will be forced to surrender its sovereignty and accept demeaning and immiserating economic policies. Others see it as the first step back from the abyss. They expect the IMF to force the country to take its medicine, as bitter as it may be, and regain economic health.



Both these views are overwrought and ultimately misleading. South Africa has more bargaining power in its relationship with the IMF than either view suggests. In the end, the terms of the IMF arrangement will depend on how effective the government was in its negotiations with the IMF.



To understand this, we need to answer three questions: Will South Africa have to surrender part of its sovereignty to the IMF? Is the IMF a particularly unreasonable negotiating partner? What responsibilities does the IMF have in negotiating the conditions?



The three questions Will South Africa have to surrender part of its sovereignty to the IMF?



Sovereignty is a complicated and sensitive issue. It raises concerns about a state’s autonomy and ability to control its own destiny. One manifestation of sovereignty is a state’s decision to sign an international agreement. It shows that it is an actor on the international stage capable of reaching binding agreements with other subjects of international law – states and international organisations like the IMF.



Nevertheless, most international agreements restrict the sovereign’s freedom of action.



Consider, for example, the African Continental Free Trade Agreement. This agreement obliges South Africa to open – and keep open – its economy to trade with the rest of Africa. Before agreeing to this limitation on its freedom of action, South Africa negotiated with its co-signatories to minimise the cost of its commitments and maximise the benefits it expects from the arrangement.



South Africa’s arrangement with the IMF is similar. It is exercising its sovereign prerogatives when it decides to enter into an arrangement with the IMF. Before doing so, the country should negotiate for the best possible deal with the IMF.



Is the IMF a particularly unreasonable negotiating partner?



No bank, charitable foundation or international financial institution provides large amounts of financing without attaching conditions designed to ensure that the recipient uses the funds responsibly and pays them back as agreed. These conditions can range from demanding collateral to requiring promises that restrict the recipient’s future conduct in some way, such as limiting the ways in which it can use the funds.



The IMF conditions its financing on policy measures rather than on collateral or promises about the use of the funds. Historically, these conditions were ideologically driven and controversial. They included reducing the economic role of the state, making economies more market friendly and more globalised.



More recently the IMF leadership has incorporated issues such as inclusiveness, sustainability, social safety nets and gender parity.



It is not easy to predict what the exact mix of conditions will be in any particular case. The experience of other countries suggests that the actual mix is a negotiated outcome. Consequently, the conditions’ content and wording will depend on the country’s economic situation, its willingness to engage in tough negotiations with the IMF and on how effective it is in convincing the IMF of the validity of its positions.



What responsibilities does the IMF have in negotiating the conditions?



The IMF’s Articles of Agreement states that it should help countries



correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.



Thus, the IMF should demonstrate that whatever conditions it attaches to its funding are consistent with the recipient’s prosperity over the medium term. It must also show that it is not helping one IMF member state at the expense of its responsibilities to other member states.



In addition, the IMF, like any international organisation, should comply with applicable customary international law principles.



First, it must respect the sovereignty of its member states, including their laws. Second, it must respect their international legal obligations and not undermine their ability to meet these obligations. Third, the IMF, which is a specialised UN agency, should, pursuant to the Universal Declaration of Human Rights, [contribute to securing the



universal and effective recognition and observance&#8221; of human rights.



Based on these principles, the IMF has three responsibilities in regard to its arrangement with South Africa. First, it must ensure that the conditions attached to its financing are consistent with the South African constitution. In particular this means that the IMF must ensure that its conditionalities are consistent with the bill of rights in the constitution.



Second, the IMF must make sure that it does not require anything that is inconsistent with South Africa’s treaty commitments. These includes the state’s international human rights and environmental obligations. Out of respect for South African sovereignty, the IMF must defer to South Africa’s interpretation of these commitments, provided they are not inconsistent with international law.



Third, the IMF should explain how it has determined that the effect of its conditionalities is consistent with the applicable international legal principles. It is important to note that this requirement does not mean the IMF cannot require the state to take such actions as cutting its budget. But it does mean that the IMF has a responsibility to show that these cuts are the least cost way of achieving its objectives.



South Africans should not view the IMF either as the protagonist in its nightmares, or as its saviour. Instead the country should treat it as it would any other financial institution. It should demand that it live up to its own international responsibilities and demonstrate why it thinks its agreement with the government will benefit all South Africans.

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South Africans should accept that the IMF is neither their worst enemy nor their saviour

NAIROBI (Reuters) &#8211; The International Monetary Fund said on Monday it had approved $7.6 million debt relief to Burundi to help address the economic impact of the COVID-19 pandemic. It said the relief for three months would be potentially raised to $24.97 million over the next 21 months, if resources are available. “IMF debt relief will help free up resources for public sector health needs including other emergency spending and help mitigate the balance of payments shock posed by the COVID-19 pandemic,” the IMF said in a statement. The IMF said it has revised downwards economic growth projections for 2020 by 5.3 percentage points to -3.2 percent this year. “The pandemic has exacerbated preexisting economic challenges and creates significant external financing needs in 2020 and 2021, mainly as a result of lower exports, elevated imports needs, and reduced remittances inflows,” it said. Burundi has so far had 328 cases of COVID-19 and one death.

IMF approves $7.6 mln debt relief to Burundi to cushion Covid-19 effects

By Dr Adrian Saville, CE, Cannon Asset Managers



In September 2006, economics professor Nouriel Roubini warned an incredulous audience of fellow economists at the International Monetary Fund (IMF) that the US housing market was at risk of collapsing – an event that could ruin the global financial system. This was at a time when the global economy had recorded its fastest patch of growth in 30 years and, in the space of a decade, US house prices had doubled, making for the sturdiest gain in house prices in the post-war era.



Unfortunately, Roubini was right. Soon after his address, the global financial crisis (GFC) struck, and the little-known scholar of emerging markets quickly became the Wall Street celebrity “Dr Doom”.



The lessons learned from the GFC encouraged policymakers worldwide to work furiously to get economies back into shape through a series of fierce and co-ordinated policy responses to the impacts of Covid-19. In turn, this has encouraged a consensus view amongst economists that the recovery from the crisis will be V-shaped. Wall Street&nbsp; agrees, with the S&amp;P500 and NASDAQ having rebounded sharply since March’s meltdown. In fact, it seems that markets anticipate that the bold responses from the world’s leading policymakers will produce an equally fierce rebound in economies and earnings.



Groundhog Day



Yet, as if trapped in the tragicomedy of Groundhog Day, Dr Doom again disagrees with this consensus, and suggests the economic trajectory is likely to be L-shaped. Admittedly, Roubini expects an economic rebound in the pandemic’s immediate aftermath, but insists that this recovery will quickly collapse beneath the weight of the global economy’s accumulated debts, giving rise to the prospect of an economic depression.



It’s tempting to dismiss Roubini as having been “spectacularly right” the first time because he was banging on the disaster drum for many years before the GFC struck. But there is more than enough evidence in the post-pandemic makeup to suggest that we should be paying close attention to a depression scenario.



Markers for concern include a collapse in vehicle sales; the imposition of trade barriers to protect domestic markets; falling commodity prices; a wave of consumer debt thanks to easy money; a dive in the federal funds rate; a surge in unemployment; sharp market swings; deepening fiscal deficits; and the risk of a deflationary price spiral.



The risk is that Roubini is right



This list bears eerie similarity to the features that characterised the Great Depression of the 1930s. So, in deliberating on Roubini’s diagnosis and the implications for policymakers and investors, the risk is not that he is wrong, but that he is right.



We ignore this risk at our peril. In depression scenarios, conventional economic policy stops working, and markets behave differently. For example, in terms of policy, economists Lawrence Summers and J. Bradford DeLong have shown the importance of fiscal expansion – rather than fiscal prudence – in depressions.



Depressions also offer a good reason to seek and maintain some price inflation. Nominal interest rates of zero can’t be lowered much further. But the real rate of interest – the nominal interest rate minus expected inflation – can be taken far below zero by policies that push inflation rates higher.



Positioning portfolios for a depression scenario, then, means preparing for a world of higher rates of price inflation, government spending stimuli, nominal interest rates of zero, and negative real interest rates.



Diversify, diversify, diversify …



In this world, the first three rules of investing must be enforced with the strictest discipline: diversify, diversify, diversify. Portfolio diversification is a free lunch available to every investor, and the surest form of risk management.



We don’t know how or when the pandemic period will end – and we can’t be sure that Roubini is right. But diversifying your portfolio across asset classes, geographies, currencies and industries has a surer prospect of getting you to your investment destination than investment decisions that, in the absence of diversification, could be perfectly right or exactly wrong. This means gold and growth assets, not gold or growth assets; it means China and the US, not China or the US; and it means healthcare and resource stocks, not healthcare or resource stocks.



… and look for transformative assets



Additionally, investors should consider investing in transformative assets. If Roubini is right, it’s likely that even in an environment of hardship and misery, investments that are inclusive, co-operative, and collaborative will thrive. Covid-19 bonds could be one such asset, where issuers include the African Development Bank, or even the Bank of America, which has come to market with a $1 billion four-year Covid-19 bond to fund lending to hospitals, nursing facilities and healthcare manufacturers.



Then there are transformative businesses that will do better in hard times by doing good business, taking the place of current portfolios winners. In March, Kenyan telecom operator Safaricom made all person-to-person transactions under 1,000 Kenyan shillings free on the mobile money service M-Pesa. Near term, this put one-quarter of Safaricom’s revenue at risk, but long term is likely to entrench the business’s position in the payments market. Likewise, British restaurant chain Leon has reinvented itself by converting 57 sites into shops selling groceries and takeaway meals, saving 1,500 jobs and looking after 70 suppliers.



In other words, depression times do not spell the end for businesses or investors. Rather, as Joseph Schumpeter implores, our task is to create out of the destruction, by redesigning, reinforcing and reinventing.



For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a>

COVID-19: Investing for Roubini’s Greater Depression

By Danesh Ranchhod, vice-president and executive director at Franklin Templeton Emerging Markets Equity



As with most parts of the world, what started out as a health crisis has also turned into a humanitarian and economic crisis. While Covid-19 infections rates have been relatively low on the African continent compared to the rest of the world, much of the region’s economies are being impacted due to the various forms of restrictions being imposed on citizens. The International Monetary Fund (IMF) has forecast Sub-Saharan Africa Gross Domestic Product (GDP) to contract by 2% in 2020 vs growth of 3% in 2019. Some of the oil-exporting countries such as Nigeria are likely to face a sharper contraction due to the lower oil price. Many current forecasts and outlooks could be rendered irrelevant given the highly uncertain nature of the Covid-19 infection and the variability of outcomes given different government policy responses. At the same time, there is a growing risk that the spread of the virus could still escalate to unmanageable levels. This is due to some additional challenges facing many African countries.



FOR MORE COVID-19 COVERAGE VISIT: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a>



1] While the level of urbanisation is still low compared to many other frontier and emerging markets, urbanisation has actually been growing fast off a low base to result in high density informal communities in larger cities. The nature of these living environments makes social distancing measures almost impossible to follow through in a government ordered lockdown.



2] Healthcare resources are constrained, with facilities lacking the necessary equipment such as ventilators and high care beds to deal with mass volumes of patients that could get sick. &nbsp;A report from McKinsey &amp; Company showed Africa has 1.4 beds per 1000 people compared to China which has 4 beds per 1000 people. Additionally, laboratory capacity is low implying that not enough testing is being done to collate a true gauge of active cases. Genomic sequencing of the virus in Africa is also the lowest globally. There is a risk that Africa may not be well represented in a potential vaccine; vaccines are typically developed on large and varied pools of sequencing data so that there is good representation of strains that may have mutated.



3] Much of the continent’s economic activity is driven by informal businesses that are small in nature. A hard lockdown would result in many businesses having to close down and subsequently leaving staff and business owners without income. There is also not much to rely on in terms of savings pools, while insurance or fiscal support for loss of income is negligible.



4] In the developed world and many parts of Asia, governments have announced Covid-19 related fiscal support for citizens and businesses amounting to 7%-10% of their respective GDPs. These far exceed support programmes at the time of the Global Financial Crisis. This quantum (relative to the GDP) of support is not possible in Africa due to fiscal pressures already faced. While the IMF and World Bank have been disbursing crisis funding to help with healthcare and related costs, it is likely that a lack of more broad fiscal support together with a hard lockdown could see African economies struggle to recover.



These challenges preclude many African governments from adopting some of the measures that are being employed elsewhere in the developed world and more formalised emerging Asian economies. <a>Extended hard lockdowns in Africa are likely to have a more dire result due to a devastating economic environment that could see increased deaths from starvation.</a>



To find a balance between containing the virus and maintaining a semblance of economic activity will require a different approach. While African governments may not have the fiscal capacity to rapidly increase hospital and equipment capacity, they can more easily at a lower cost increase widespread testing to get a true sense of active cases.  The testing can be multi-level with initial screening doing a lot to filter patients that require immediate testing and care. This together with mobile operators can introduce a form of smart contact tracing and awareness using mobile phones. As the level of cases will initially be low, infected patients can be housed in basic isolation centres that do not require high care in key areas to help alleviate pressure on hospitals and reduce the reproduction rate given it is hard to isolate in high-density informal areas. Other soft lockdown measures such as border control and social distancing measures where possible can still take place to help flatten the curve. Most importantly having confidence around widespread testing and tracking will help to create more timely data on active cases and recoveries and assist in identifying hot spot areas that could then be considered for targeted lockdowns rather than national hard lockdowns. It can also allow economic activity to remain in some form allowing many informal businesses to continue to operate and giving much-needed income to large parts of the populace that have no social safety net in any form.

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Op-Ed: Why Africa cannot afford an extended hard lockdown in the COVID-19 crisis

South Africa&#8217;s Minister of Economic Development Ebrahim Patel said that the country could rapidly move to phase 3 of lockdown should it avoid a sharp increase in levels of infections as 1.5 million people prepare to return to work as the country <a href="https://www.cnbcafrica.com/wp-content/uploads/2020/05/Risk-Adjusted-Strategy-Regulations-29-April-2020.pdf">enters phase 4</a>. See the full statement below&#8230;



Parliament, Friday, 1 May 2020 – The Portfolio Committee on Trade, Industry and Competition, together with the Select Committee on Trade and Industry, Economic Development, Small Business, Tourism, Employment and Labour today heard that should the country avoid a sharp increase in the levels of infections with the return to work of large numbers of workers and expanded testing and healthcare facilities, the economy could shift to level 3 as soon as possible. Minister Ebrahim Patel told the committees that the country does not need to stay at level 4, which commenced today, for a specific number of weeks but can move rapidly to a lower level should risks be mitigated. The committees heard that the initial return to work will be based on the national level, but will progressively be expanded to provincial and district level, enabling workplaces to adapt to the level of infections and healthcare readiness in localities. He emphasised that the Covid-19 pandemic will impact the South African economy in deep ways due to the closure of many companies during level 5. “Work is still underway to establish the extent of the impact. We are keen to restart as many economic areas as possible.” The committees heard that the department is taking responsible steps to deliberately reopen the economy in phases, with the safety of the South African people at the forefront of how that is done, in ways that allow livelihoods to be preserved – and protecting the productive assets of the nation and sustaining as much of the economy as it can, while protecting lives. The estimated impact on the economy varies at the moment, and will be driven by the trajectory of the virus both in South Africa and globally. The International Monetary Fund estimates that the gross domestic product (GDP) will fall by 5.8% in 2020. The South African Reserve Bank estimates that the GDP will fall by 6.1% in 2020. The Industrial Development Corporation estimates that the GDP will fall by 6.3% in 2020 The committees were informed that the Competition Commission received about 1 000 concerns and complaints. Many have already achieved closure on some cases where penalties were imposed or remedial action was taken. Some prosecutions are also pending. Furthermore, about 1 700 complaints were raised with the National Consumer Commission. The Minister said the department is trying to find a balance between due process and the right of the public to be heard. The committee heard that the R500 billion Covid-19 stimulus package that was announced by the President is not an elitist package as it includes the Unemployment Insurance Fund, which is an “absolute lifesaver” for low-level paid workers. The Committee Chairperson, Mr Duma Nkosi, said the committee commends the responsible and decisive manner in which the government is dealing with the Covid-19 pandemic. “We know that the lives of our people come first, and we will be guided by this principle. At the same time, we recognise the difficulty in the balancing act of keeping our people safe and reopening the economy, as these are interlinked.” ISSUED BY THE PARLIAMENTARY COMMUNICATION SERVICES ON BEHALF OF THE CHAIRPERSON OF THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY, MR DUMA NKOSI.

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SA’s economy can move rapidly to level 3 lockdown if no sharp increase in infections: Minister Ebrahim Patel

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The International Monetary Fund says Nigeria’s economy is currently threatened by the twin shock of coronavirus and falling oil prices. Joining CNBC Africa to discuss how these shocks are impacting the country’s investment climate is Vincent Nwani, Business and Investment Consultant.

How COVID-19 impacts Nigeria’s investment climate

By Vuyani Ndaba



JOHANNESBURG (Reuters) &#8211; South Africa’s <a href="https://www.cnbcafrica.com/news/2020/04/15/poor-wealth-forecasts-for-south-africa-due-to-covid-19-sa-wealth-report/">economy will contract sharply this year</a> as activity is hit by the coronavirus outbreak, despite expectations the <a href="https://www.cnbcafrica.com/videos/2020/04/20/why-sarb-should-step-in-to-save-sa-companies-that-are-too-big-to-fail/">central bank</a> will cut interest rates again in May, a Reuters poll found on Monday.



The country is <a href="https://www.cnbcafrica.com/videos/2020/04/20/covid-19-martin-kingston-on-how-to-flatten-sas-recession-curve/">already in recession</a>, with the economy expected to have contracted 1.9% last quarter and to shrink an unprecedented 23% this quarter, the poll showed.



<a href="https://www.cnbcafrica.com/videos/2020/04/14/sarb-cuts-rates-by-100-basis-points-to-record-low/">Another rate cut from the central bank</a> &#8211; which cut 100 basis points from borrowing costs on March 19 and then again on April 14 &#8211; is expected to help the finance ministry, which has already ramped up borrowing.



Economists now expect the economy to shrink 4.9% this year before recovering with 2.0% growth next year. Last month’s survey had suggested 0.3% and 1.2% expansions, respectively.



The forecasts showed huge levels of uncertainty due to a <a href="https://www.cnbcafrica.com/coronavirus/2020/04/09/sa-extends-lockdown-by-two-weeks-until-end-april/">country-wide lockdown</a>. Even the most optimistic <a href="https://www.cnbcafrica.com/videos/2020/04/20/african-billionaire-christo-wiese-on-covid-19-crisis-and-its-impact-on-sas-economy/">economist forecast</a> a contraction of 1.0%, while the most pessimistic predicted a 14.6% contraction.



Base effects may play a role next year, with the most optimistic economist forecasting growth of 5.1%, but some respondents said the lockdown would make it costly and difficult to bring the economy back to normality.



With consumers staying home and global oil prices falling sharply, inflation forecasts were also cut. Prices are now expected to rise 3.8% this year and 4.5% in 2021, compared with 4.2% and 4.6% in a March poll.



That would give the South Africa Reserve Bank room to ease policy.



Nine of 15 economists polled in the past week expected interest rates to be cut by 50 basis points to 3.75% in May, while three said the Bank would cut by 25 basis points. Two expected no move, and one pencilled in a 100 basis-point cut.



“Given the scale of the SARB’s forecast revisions and that of its surprise rate cut, there is little doubt now that its hawkish reservations to cut rates have been lifted,” said Francesca Beausang, economist at Continuum Economics.



On April 14 the central bank slashed its repo rate by 100 basis points to 4.25% in an unscheduled meeting, similar to the U.S. Federal Reserve’s emergency cuts last month, to mitigate the impact of the coronavirus.



“It seems as though it is keen to cut more than any emerging markets bank to make up for its previous reservations,” Beausang added.



Meanwhile, the balance sheet of the South African Reserve Bank looks more healthy and counter-cyclical in dealing with exogenous shocks than that of the National Treasury.



Economists answering an extra question said South Africa asking for an <a href="https://www.cnbcafrica.com/news/2020/04/14/imf-approves-immediate-debt-relief-for-25-countries-amid-covid-19-crisis/">International Monetary Fund</a> rapid financing facility without conditions or the SARB increasing its purchase of bonds on the secondary market would be most effective in mitigating the country’s funding crisis during the lockdown.



Other measures favoured included the SARB issuing coronavirus or disaster bonds targeted exclusively for the lockdown period or issuing more shorter-maturity bonds.



Capital Economics said the chances of South Africa turning to the IMF were rising.



“Finance Minister Tito Mboweni ruled out the possibility of any multilateral support that comes with conditions. But the IMF’s Rapid Financing Instrument (RFI) or its new Short-Term Liquidity Line might fit the bill,” it said in a note.



The RFI provides rapid and low-access financial assistance to member countries facing an urgent balance of payments requirement, without the need to have a fully fledged programme in place.



Mboweni ruled out an IMF adjustment programme last week and said the country didn’t need budget support, despite acknowledging that there would be a deep recession this year because of the global COVID-19 pandemic.



Asking multilateral institutions, especially the IMF, for cash is deeply unpopular with a faction in the governing African National Congress and trade unions that the party uses to rally support before elections. The ANC and two allies warned Mboweni earlier this month against seeking IMF assistance.



(Additional polling by Khushboo Mittal in Bengaluru; Editing by Jonathan Cable and Hugh Lawson)



This article was first published on Reuters Africa <a href="https://af.reuters.com/article/investingNews/idAFKBN2221Z2-OZABS">https://af.reuters.com/article/investingNews/idAFKBN2221Z2-OZABS</a> and is republished with its permission.



For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a>

South African economy to shrink 4.9% in 2020, SARB to cut rates in May – Poll

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The International Monetary Fund has sited that the COVID-19 pandemic will cause the worst global recession since the Great Depression.

Absa on COVID-19 economic impact on SSA

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The Executive Board of the International Monetary Fund has approved one billion dollars for Ghana to address the COVID-19 pandemic. The funds will be drawn under the Rapid Credit Facility. Samuel Kofi Ampah, Head of Research at Groupe Nduom joins CNBC Africa to discuss the growing implications of the COVID-19 pandemic on Ghana’s economy.

IMF approves $1-billion emergency funds for Ghana to fight COVID-19 pandemic

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Governments on the continents have put forward strict measures in an effort to fight coronavirus of which, the impact will be greatly felt across the economies. The World Bank and the International Monetary Fund have stressed on the need to provide debt relief to developing countries. Grant Harris, CEO, Harris Partners LLC joins CNBC Africa for more.

How African economies can survive the COVID-19 crisis

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The Managing Director of the International Monetary Fund, Kristalina Georgieva says the fund is working hard to respond to Nigeria’s request so that a proposal can be considered by the IMF’s Executive Board as soon as possible. Nigeria’s Minister of Finance, Budget and National Planning, Zainab Ahmed had disclosed that Nigeria had applied to IMF’s Rapid Credit Facility. Kyari Bukar, Former Chairman of the Nigeria Economic Summit Group joins CNBC Africa more.

COVID-19: IMF considering Nigeria’s financing request

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The International Monetary Fund (IMF) and the World Bank&#8217;s International Development Association have determined that Somalia has taken the necessary steps to begin receiving debt relief under the enhanced Heavily Indebted Poor Countries Initiative. Prime Minister of Somalia, Hassan Ali Khaire joins CNBC Africa for more.

Somalia to receive financial aid under World Bank’s HIPC initiative

NAIROBI (Reuters) &#8211; Kenya’s government plans to seek help from the International Monetary Fund, pay pending bills to suppliers and quickly process company tax refunds to support the economy in the face of the coronavirus crisis, officials said.



Patrick Njoroge, the central bank governor, told a news conference on Tuesday that the government is seeking emergency assistance from the IMF of up to $350 million. 



“This is assistance that doesn’t have the conditionalities of programs &#8230; a lot of this could be directed towards budget support,” Njoroge said, adding that more support will be sought from the World Bank. 



Kenya has 16 confirmed cases of COVID-19, and the disease is hurting crucial tourism and farm exports. 



The government expects revenue collection to be hit as both imports and domestic consumption slow, Finance Minister Ukur Yatani told Reuters late on Monday. 



“We are looking at underperformances as a result of just COVID-19, of about 70 billion (shillings) &#8230; in terms of revenue for the remaining three months (of this financial year),” he said, adding that situation was evolving fast. 



Yatani said the government would shift planned spending towards urgent development projects. 



It plans to release 49 billion shillings ($460 million) to suppliers for the unpaid bills and expedite the payment of close to 10 billion shillings in value-added tax refunds to businesses in the next two to three months, he said. 



The World Bank is making $60 million available to Kenya’s health sector to help it deal with the outbreak. 



President Uhuru Kenyatta, who has been meeting business executives, said on Monday that fiscal stimulus measures would be will be announced later this week. 



Kenya’s central bank has already implemented stimulus measures, cutting interest rates by a heftier than expected 100 basis points on Monday and reducing the amount of cash that banks are required to hold as reserves. 



It is also letting borrowers restructure loans if they enter into difficulties due to the outbreak. 



Yatani said the government and firms were seeking new sources of raw materials imports to keep industries going during the crisis. 



“We already have challenges with the inflow of (materials) inputs&#8230; inputs are either delayed or are not moving in as required,” he said. 



($1 = 106.6000 Kenyan shillings) 



(Additional reporting by Omar Mohammed; editing by John Stonestreet)



This article was first published on Reuters Africa <a href="https://af.reuters.com/article/investingNews/idAFKBN21B1A7-OZABS">https://af.reuters.com/article/investingNews/idAFKBN21B1A7-OZABS</a> and is republished with its permission.

Kenya to seek IMF help, pay arrears, speed tax refunds over coronavirus, officials say

Report by Elias Biryabarema



KAMPALA (Reuters) &#8211; Uganda will request the World Bank for a loan of $190 million to help cushion its economy from the impact of the coronavirus pandemic, its finance minister said.



The government has cut its economic growth forecast this fiscal year to 5.2–5.7% from an initial projection of 6%, the minister, Matia Kasaija, said in a statement late on Thursday. 



The disruption caused by the coronavirus are expected to cut industrial output, tourism earnings and the government’s tax collections. 



The government will seek a $100 million budget support loan for this financial year and a further $90 million for the next financial year , Kasaija said. 



It will also approach the International Monetary Fund for help with a projected decline in foreign exchange reserves from 4.2 months worth of imports to 3.5 months. 



The Ugandan shilling declined sharply this week, prompting the central bank to intervene three times in a row to sell dollars and offer support. 



Kasaija said as a result of the economic upheaval from the outbreak, Uganda’s imports were expected to decline 44% in the four months to June. The expected widespread loss of jobs was likely to push an estimated 780,000 people into poverty, he said. 



Uganda has not reported any cases of the coronavirus, which emerged in China late last year and has been spreading around the world. 



Nevertheless, on Wednesday, the government ordered the closing of schools, bars and it banned public gatherings to prevent any outbreak. 



($1 = 3,835.0000 Ugandan shillings) 



(Editing by Duncan Miriri and Robert Birsel)



This article was first published on Reuters Africa <a href="https://af.reuters.com/article/investingNews/idAFKBN2171ED-OZABS">https://af.reuters.com/article/investingNews/idAFKBN2171ED-OZABS</a> and is republished with its permission.

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