Inside Politics

State mulls consolidation of Sh66b debt owed to G-20 group and China

Friday, January 29th, 2021 00:00 |
CBK Governor Patrick Njoroge. Photo/PD/FILE

The government will consolidate its $600 million (Sh66 billion) external debts owed to the G-20 group and China, which has been suspended until June 30, 2021.

Kenya was to pay the G-20 group of wealthy nations about $222 million (Sh24.4 billion) from January 1 but the debt repayment was suspended until June 30. The country also owes China $378 billion (Sh41.6 billion) .

Central Bank of Kenya (CBK) Governor Patrick Njoroge, further revealed the G-20 has committed to extend the debt service suspension initiative beyond June 2021 but that a decision would be made in April, when the International Monetary Fund (IMF) and World Bank meet.

“We will have a delay or consolidate the payments falling due to these creditors between January 1 and June 30 and be repaid over five years with a one year grace period,” said Njoroge.

National Treasury statistics indicate that, as at June 2020, Chinese loans comprised 21 per cent of Kenya’s external debts, while World Bank’s was at 25 per cent.

Whereas sovereign bond holders accounted for 19 per cent, Commercial banks had 11 per cent and the African Development bank 7.5 per cent.

Njoroge said the current account deficit is estimated at 4.8 per cent of gross domestic product in 2020 and is projected to stabilise at 5.1 per cent in 2021.

He said Kenyans should expect a modest growth in 2020, with a strong rebound expected in 2021, riding on the resilience of the agriculture, construction and manufacturing sectors.

Dark days

“So in a sense, the dark days of 2020 and the re-opening of the economy, the dynamism and momentum that is being gained in these dynamic sectors will push us strongly into 2021,” said Njoroge in a brief to the media.

He said inflation remains low and well anchored at a headline of 5.6 per cent as at December, while foreign exchange reserves closed 2020 at $7.750 billion (Sh856 billion), enough to cover the country’s imports for the 4.76 months.

“We expect that in 2021 the foreign exchange market will remain stable, and we will only intervene to minimise volatility,” he said.

He said though liquidity was adequate and well distributed credit risk remains elevated with the ratio of non performing loans (NPLs) to gross loans increasing to 14.1 per cent in December, projecting that the figure would not exceed 16 per cent.

“We don’t see these numbers surging. Assuming that the economy remains flat, the dynamism does not reveal itself or the benefits of re-opening does not come through for another three months, NPLs would rise to 16 per cent to17 per cent, numbers that are still manageable,’ he said.

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