NAIROBI: Kenya is holding talks with the International Monetary Fund on a new lending facility as the East African nation faces huge budget deficits worsened by the coronavirus crisis.

The government has abandoned expensive commercial debt to cut back on ballooning repayments at a time when its revenue collection has been squeezed by the pandemic.

Tobias Rasmussen, the IMF's resident representative in Nairobi, told Reuters on Tuesday that the new facility was being discussed following a Kenyan request that preceded the pandemic.

He gave no more details but Finance Minister Ukur Yatani confirmed talks were under way.

"We are looking at a disbursement arrangement where we, to some extent, benefit from budget support," he said.

The policy objectives of the programme would also include reforms at state agencies, he added.

The minister said no figure had been set for the facility, and talks were at an early stage.

A Treasury source told Reuters separately that the talks were expected to conclude by the end of this year.

The IMF approved $739 million in emergency financing for Kenya in May to help it deal with the economic shock caused by the COVID-19 pandemic.

The government plans to start unwinding tax cuts unveiled in April to shore up consumer demand during the pandemic, President Uhuru Kenyatta said in September.

The move is part of measures aimed at boosting state coffers, with the government facing huge budget deficits in the short term.