- Kiptoo said that things are not bad as demonstrated by Moody's, adding that the liquidity market is gaining stability.
- World Bank's board is scheduled to meet on May 26 to approve the $1 billion to Kenya
Image: EZEKIEL AMING'A
Kenya has defended its ability to repay debt, brushing off a low credit rating handed by Moody's Investors last weekend.
The rating firm downgraded Kenya's creditworthiness both in the international and domestic markets to B3 from B2 informed by amplified government liquidity risks.
B3 foreign currency issuer rating is classified as “high credit risk” and just one level above “very high credit risk”, a move likely to make lenders extra cautious.
However, on Tuesday, National Treasury PS Chris Kiptoo told the Departmental Committee on Finance and National Planning that things are not bad as demonstrated by Moody's, adding that the liquidity market is gaining stability.
"Reverse repo market shows banks were struggling with liquidity. Even so, the interbank market is back to normalcy, spreads are trimming. We expect a capital injection of close to Sh200 billion by the end of June,'' Kiptoo said.
He added that the amount will be used prudently to clear maturing loans and meet recurrent and development budget needs.
Kiptoo revealed that the country is expecting $300 million this week as part of an external loan plan and a further $1 billion from the World Bank before the end of June.
According to him, the amount from World Bank will largely be used to ease the cash flow crisis and boost its dwindling foreign exchange reserves that have taken a hit from the weakening shilling.
The global lender's board is scheduled to meet on May 26 to approve the $1 billion to Kenya through its Development Policy Operation (DPO) framework.
DPOs are provided in the form of non-earmarked loans, credits, or grants that support the country’s economic and sectoral policies and institutions.
The facility will be coming with a litany of demands geared towards strengthening domestic revenue mobilisation.
Kiptoo said they have formulated a sound fiscal policy stance over the medium term aimed at supporting the Bottom - Up Economic Transformation Agenda of the Government through a growth-friendly fiscal consolidation plan.
"This is designed to slow down the annual growth in public debt and implement an effective liability management strategy without compromising service delivery to citizens,'' Kiptoo said.
He added that this is expected to boost the country’s debt sustainability position and ensure that Kenya’s development agenda honours the principle of inter-generational equity.
Kiptoo said the country's fiscal plan is well-aligned to meet both domestic and external debt obligations, adding that the country is not in debt distress as indicated.
His sentiments echo those of the International Monetary Fund (IMF) which insists that Kenya’s debt is sustainable and the administration of President William Ruto is moving swiftly to improve its fiscal position.
IMF boss Kristalina Georgieva said this during her recent visit to the country.
"We do not see Kenya facing difficulties to serve the $2 billion next year,” Georgieva said, adding that the nation's reserves are “still quite sound” and the government can raise money from sources including syndicated loans and the IMF
Kenya is expected to make the bullet payment to retire the 10-year sovereign bond whose issuance in 2014 signaled the Jubilee administration’s turn to commercial debt to fund the budget.
Kenya took up $2.75 billion (Sh345.5 billion at today’s rates) 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 per cent respectively.
It is also shopping for the fifth Eurobond in the international market worth $2 billion. The amount will be used to retire the inaugural Eurobond taken in 2014.