Inside Politics

Kenya to borrow Sh1.3tr externally by June next year, IMF says

Thursday, April 8th, 2021 00:00 |
The National Treasury building. Photo/PD/Alice Mburu

Kenya plans to borrow $12.4 billion (Sh1.34 trillion) between now and June 2022 from foreign sources, International Monetary Fund (IMF) has said.

The Bretton Woods institution has the made the disclosure in a report detailing terms and conditions of a separate $2.34 billion (Sh253.3 billion) financing package approved by its board last week.

The amount includes $7.3 billion (Sh790.2 billion) in Eurobonds, $4.8 billion (Sh519.6 billion) in concessionary borrowing and $282 million (Sh30.5 billion) semi-concessional loans, it said in a report on its website.

About $2.3 billion (Sh248.9 billion) of the Eurobonds will be new borrowing for infrastructure projects, while $5 billion (Sh541.3 billion) is refinancing for a Eurobond maturing in 2024 and to retire pricey syndicated loans, it said.

The external borrowing during the next 14 months amounts to about 6 per cent to 7 per cent of gross domestic product, according to Yvonne Mhango, head of research for sub-Saharan Africa at Renaissance Capital. 

“It’s a significant amount for a country with debt that is already close to 70 per cent of gross domestic product (GDP), and one that is at high risk of debt distress,” she said.

“The increase in domestic yields may be a factor that compelled the authorities to seek some external financing. However, we expected an increase in concessional financing to help keep financing costs moderate.”

Debt distress

“While Kenya is at high risk of debt distress and subject to zero limits on non-concessional borrowing, the authorities have requested, and staff supports, non-zero limit exceptions for project financing and debt-management operations,” according to the IMF report.

Some of the reforms Kenya will implement during the 38-month IMF programme include broadening the tax base to grow revenue and freezing civil-service recruitment.

Treasury also agreed to evaluate fiscal risks posed by about 20 large state-owned enterprises including Kenya Airways, Kenya Railways, Kenya Power and Lighting and Kenya Electricity Generating Company. 

The State will seek an independent adviser to evaluate the financial situation of its national airline and the least costly restructuring options for the company.

By October 2022, Kenya would have expanded reporting on public debt to cover non-guaranteed public-sector debt, including arrears. –Bloomberg

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