- The country’s total public debt currently stands at Sh9.2 trillion.
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The debt servicing is projected to increase by 34 per cent in the year 2023/24 from current Sh930.35 billion to Sh1.25 trillion.
Image: Courtesy
Kenya is pushing for debt forgiveness in the wake of high short-term debt obligation and lThe debt servicing is projected to increase by 34 per cent in the year 2023/24 from current Sh930.35 billion to Sh1.25 trillion.ow revenue collection.
Members Parliamentary Public Debt and Privatisation Committee and their counterparts from the Finance and Planning on Tuesday met World Bank and the International Monetary Fund (IMF) officials on the sidelines of the Spring Meetings to initiate talks on debt forgiveness.
Speaking to a local TV station, Chairman, Parliamentary Finance and National Planning Committee Kuria Kimani admitted that the country is in debt distress hence needs urgent support.
“It is not a secret that we are in debt distress. We appreciate some of fiscal discipline measures initiated by IMF and World Bank. However, those are long term. We need urgent intervention to prevent a default,’’ Kuria said.
He said that the state is struggling even to pay civil servants hence the need to act swiftly to curb the crisis.
The country’s total public debt currently stands at Sh9.2 trillion. The debt servicing is projected to increase by 34 per cent in the year 2023/24 from current Sh930.35 billion to Sh1.25 trilliot servicing is projected to increase by 34 per cent in the year 2023/24 from current Sh930.35 billion to Sh1.25 trillion.n.
Kenya is expected to make the bullet payment to retire the 10-year sovereign bond whose issuance in 2014 signalled the Jubilee administration’s turn to commercial debt to fund the budget.
The country took $2.75 billion (Sh346 billion at yesterday's rate) in two tranches consisting of a 10-year paper and a five-year issuance ($750 million), at interest rates of 6.78 per cent and 5.87 percent respectively.
The five-year paper was repaid partly using the proceeds of another $2.1 billion Eurobond issued in May 2019.
Debt forgiveness happens when a lender forgives either all or some of a borrower’s outstanding balance on their loan or credit account. For a creditor to erase a portion of the debt or the entirety of debt owed, typically the borrower must qualify for a special program.
While this sounds like an ideal debt solution, debt forgiveness is not a get-out-of-jail-free card as it exThe country wants its plea to be heard at G20 meeting poses the country’s debt vulnerability, making it unsuitable for lenders.
In December last year, Fitch Ratings downgraded Kenya's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'B' from 'B+'. The Outlook is Stable.
A month later, global ratings agency Standard and Poor (S&P) cut Kenya’s ratings outlook from stable to negative on concerns about the country’s debt servicing capacity due to constrained international market access and under performing domestic bond issuance.
An economy must be eligible to borrow from the World Bank’s International Development Agency, which provides interest-free loans and grants to the world’s poorest countries, and from the IMF’s Poverty Reduction and Growth Trust, which provides loans to low-income countries at concessional rates.
It must also be facing an unsustainable debt burden that cannot be addressed through traditional debt-relief mechanisms.
Other parameters include having a track record of reform and sound policies through IMF- and World Bank-supported programs and develop a Poverty Reduction Strategy Paper (PRSP) through a broad-based participatory process.
The Executive Boards of the IMF and World Bank formally decide on a country’s eligibility for debt relief and the international community commits to reducing debt to a level that is considered sustainable.
This stage is referred to as the decision point.
Once a country reaches it, it may immediately obtain interim debt relief. To receive full reduction in debt under the HIPC Initiative, a country must:
Establish a further track record of good performance under programs supported by loans from the IMF and the World Bank.
This is not the first time Kenya is receiving a debt relief.
In January 2021, the country received a debt payment relief from Paris Club creditors that saw it delay due loans worth $802 million to the end of June the same year.
The lenders said that in the application of the term sheet of the Debt service suspension Initiative (DSSI) and its addendum also endorsed by the G20, it recognised that Kenya is eligible to benefit from the initiative.