MORATORIUM

Kenya benefits from G20 debt relief for the poor

This follows intervention by the World Bank and IMF.

In Summary
  • Focus Economics lists Kenya at position 17 among poorest countries.
  • The country is also among 76 world’s poorest nations that are eligible to receive the World Bank’s International Development Association (IDA) funding.
Graph showing Kenya's debt.
Graph showing Kenya's debt.

Kenya is among the World's poorest countries to benefit from a debt relief by the 20 wealthiest countries in a decision reached on Monday.

G20 Finance Ministers and Central Bank Governors, led by Chancellor Rishi Sunak, held a virtual meeting to discuss the details of a coordinated fiscal, monetary and regulatory response to the coronavirus pandemic.

The UK and India finance ministers were among those that agreed on a decisive action to reduce the global economic damage of the virus, setting out an action plan.

 
 
 

The plan includes a call for the swift implementation of a $200 billion (Sh21.44 trillion) package of global support from the World Bank Group and Regional Development Banks.

The money will be invested in health programmes, emergency fiscal support to the poorest countries and a number of other global initiatives.

They agreed to suspend debt payments from the world’s poorest countries freeing up £12 billion (Sh1.59 trillion) to tackle the virus, following intervention by the World Bank and International Monitory Fund (IMF).

This is a relief for Kenya whose debt hit a new high of Sh6.3 trillion in March, latest Central Bank of Kenya data shows. Out of this, Sh3.2 trillion is in foreign debt.

“It’s right that we have suspended debt payments for the world’s poorest countries and are supporting the most vulnerable health systems in the world, which in turn makes us all safer,” chancellor Sunak said.

Focus Economics lists Kenya at position 17 among poorest countries in the world with a Gross Domestic Product Per Capita of $1,960.5.

 

It is expected to fall further to position 15 in 2023 despite improving to $2,357.12.

 
 

The country is also among 76 world’s poorest nations that are eligible to receive the World Bank’s International Development Association (IDA) funding.

Early this month, the global lender approved $50 million (Sh5.3 billion) in immediate funding to support Kenya’s response to the global Covid-19 pandemic under a new operation – the Kenya Covid-19 Emergency Response Project.

Established in 1960, IDA helps the world’s poorest countries by providing grants and low to zero-interest loans for projects and programmes that boost economic growth, reduce poverty, and improve poor people’s lives.

It is one of the largest sources of assistance for the world’s 76 poorest countries, 39 of which are in Africa.

The G20 relief comes with an enhanced IMF support package.

“The UK is at the forefront of international action in the fight against the Covid-19 outbreak and we’ll continue to work with our allies to save people’s lives and support the global economy,” Sunak said.

The Chancellor, who led development of the action plan with his Indian counterpart, also called on more G20 finance ministers to fund the development of vaccines.

The UK has already contributed £250 million (Sh33.2 billion) for the Coalition for Epidemic Preparedness Innovations—a global organisation that conducts research to develop vaccines against infectious diseases.

In total, the UK has so far contributed £744 million (Sh99 billion) in aid to the fight against coronavirus, to help slow down the spread of the disease around the world and help manage the global economic damage.

The Monday meeting preceded Rishi Sunak’s previous discussions with G7 counterparts, and was a follow up of the G7 leaders’ call on April 16.

The Chancellor is expected to remain in close contact with key international counterparts including ministers across the G7 and G20.

The latest development come even as economist remain sceptical if China, which Kenya is heavily indebted to, will give any relief.

"The government borrowed like everything was going to be rosy. I doubt if China will offer any relief," economist Mihr Thakar told the Star.