• Over half of Kenya's Budget goes on debt repayment and over half of that goes to China
• With debt to GDP ratio of 56 percent, Kenya will struggle to meet its debt obligations with reduced tax receipts
Yesterday ANC party leader Musalia Mudavadi asked the Chinese government to "open up avenues for interest waivers, debt restructuring and deferring of some of the loan repayments" (see P6).
Kenya's debt to GDP ratio is 56 percent which has alarmed the IMF. Kenya was banking on continued growth of around 6 percent. Now it is facing a contraction in the economy because of coronavirus.
Over half the Budget goes on debt repayment and half of that goes to China to pay for the infrastructure binge of the last decade. Unless the virus passes quickly and tax receipts recover, Kenya may not be able to pay all its debtors.
Kenya will need a grace period on its loans if it is to meet the huge costs of social protection and a stimulus package.
However Mudavadi was wrong to state that China has a "moral obligation" to waive the debt repayment because the virus started in Wuhan.
All Kenya's bilateral and multilateral debtors have a moral obligation to help developing countries meet the enormous challenge of Covid-19.
China should reschedule its loans but so should other lenders.
Quote of the day: "We prefer poverty in liberty than riches in slavery."
Ahmed Sékou Touré
The first president of Guinea died on March 26, 1984