Inside Politics

Commercial loans hurt Kenya’s risk profile, Treasury report shows

Tuesday, October 20th, 2020 00:00 |
Central Bank of Kenya. Photo/PD/File

Lewis Njoka @LewisNjoka

Borrowing from commercials sources, as opposed to concessional loans, has increased Kenya’s cost of loans and affected negatively the country’s risk profile, a report by the National Treasury shows.

This has seen the government, through the medium-term debt strategy, seek to move away from commercial loans and lean more towards concessional loans.

External debt though largely skewed towards concessional terms has been negatively impacted by commercial loans in the portfolio.

Maturity period

Such commercial loans such as Eurobonds have impacted  cost and risk profile including the average maturity period, grace period and average maturity rate and average interest rate as new external loan commitments were 15, six and four years respectively,” says the Annual Public Debt Management Report 2020.

The financial year 2019/2020 report, tabled in the National Assembly on Friday, shows that Kenya’s total public and publicly guaranteed debt rose to Sh6.7 trillion, equivalent to 65.6 per cent of the gross domestic product (GDP), as at the end of June.

Of the Sh6.7 trillion, 52.5 per cent is external debt while 47.5 per cent was borrowed domestically. A majority of the loans are concessional loans.

Since then, the debt has risen further to stand at Sh7.1 trillion as of August this year, according to the Central Bank of Kenya (CBK).

As of June 30, public external debt stood at Sh3.4 trillion with multilateral creditors comprising 39.1 per cent up from 31.8 per cent same time in 2019.

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