The current economic market coupled with the depreciation of the shilling could push up Kenya's debt portfolio, according to investment advisors Cytonn
It advises that the country should initiate a conversation on a possible debt moratorium or even forgiveness with its foreign debtors both on the bilateral and multilateral debt.
This according to Cytonn, will allow the government to redirect funds towards the containment of the coronavirus pandemic.
This year's loan repayment to China’s Exim bank, which includes the SGR loan if pushed by the government will free up approximately Sh71.4 billion, for the current fiscal period.
In the 2020 Budget Policy Statement, Sh630.1billion had been allocated towards debt repayment in the FY’2020/21 budget.
"Restructuring the existing bilateral, multilateral and foreign commercial debt will help ensure the livelihoods of the citizenry is not compromised," says Cytonn.
According to Fitch Ratings, the economic crisis triggered by the coronavirus will halt Kenya's fiscal consolidation and increase the country's financing needs.
The credit rating provider expects Kenya's general government debt to continue rising through FY22 to reach about 70 per cent of GDP.
This is higher than it’s pre-coronavirus forecasts, which saw debt peaking at 65 per cent of GDP.
Currently domestic Treasury auctions are typically undersold, and therefore much of the increased borrowing in FY21 and FY22 will have to come from external sources, leading to an increase in Kenya's external debt, which is already high compared with 'B' rated peers.
Fitch affirmed Kenya's 'B+' rating in December 2019 in part due to the country's strong and stable growth outlook.
However, it said failure to stabilise government debt/GDP levels or a widening of the current account caused by falling export receipts or remittance inflows could lead to negative rating action.
The concern on increasing debt follows the country missing out on the International Monetary Fund’s debt service relief to poor countries announced on Monday.
IMF did not, however, leave Kenya completely in the dark doubling the country’s reserve of foreign currency to Sh75 billion.
