Kenya: Debt Headache Compounds Govts Worries amid Fears for Economy

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Amount of Debt has now dropped by sh.29 billion after reconciliations were passed by the National Treasury through the supplementary budget. The drop has revised what Kenya planned to pay this year to sh.253.2 billion, so much low than sh.282.3 billion that was contained in the original budget for 2019/20.

Kenya has started talks with foreign lenders with the intentions of having repayments rest at the time when the world is headed into recession due the global pandemic. During the Covid-19 crisis, President Kenyatta stated that Kenya had opened talks with external lenders so that the debt repayment is suspended.

He said that the global institutions and other regional institutions such as African Development Bank and the African Import Export Bank, have offered emergency credit facilities that Kenya plans to tap into. These largest economies in the world, have have actually issued a debt suspension. This is to allow Kenya to spend more it the fight against the pandemic.

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So far a third of Kenya’s debt that fall due belongs to China. Through the Exim bank of China and China Development Bank, making the Asian nation one of the countries Kenya must engage with. These two banks expect a total amount of sh78.4 billion. Out of this, sh23 billion goes to the principal repayments owed to the Exim Bank of China. An additional of sh37.8 billion will be interest owed to it.

If China had not delayed the six months disbursement of the first tranche for the Standard Gauge Railway then the amount would be sh10.5 billion more.

“We don’t have a debt relief. The overall low pays in the principle payments of sh10.5 billion. Which is mainly because of pushing forward one principal payment for SGR loan. It had to be paid in July 2019 but instead it was paid in Jauary2020. This was because the first disbursement to SGR came late,”

Treasury Principle Secretary Julius Muia told the nation on a short story.

Loans and repayment plans

The suspension of the debt repayment has been moved for 6 months. Instead of Kenya paying sh33.5 billion, it will be paying sh22 billion. The sh.22.3 billion owed to China is also maturing.

The maturity of Eurobond has also come at a time for Kenya. This now makes Kenya pay a total debt of sh48.9billio. This includes interest payment for the Eurobonds taken between 2014 and 2019. The Treasury data shows that sh14.5 billion will be used to pay the debut Eurobond where Kenya borrowed sh 200 billion. The 2019 Eurobond will attract an interest of sh.17.2 billion.

Besides Exim Bank of China, Kenya owes Trade Development Bank sh43.3 billion which matures this year.

Summary

In the financial year that starts on 1st July, Kenya needs to pay a total of sh630.1 billion. Kenya’s total debt reached  a new rank that is 6.3trillion. The debt position gets worse since most of Kenya’s debt portfolio is dollar dominated.

The current figure on the external debt is sh3.2 trillion. This brings the total debt portfolio for Kenya at sh6.3 trillion.

More:

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Chinese bank loans cripple Latin America and Africa, says NGO

An Economically Struggling Nation, Equatorial Guinea, donates $2 million to China in the Fight against Coronavirus

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