Azimio la Umoja One Kenya Coalition Party’s presidential candidate Raila Odinga will face a bumpy ride renegotiating new debt terms with rich countries if he takes power after the August poll.
The veteran opposition politician, who has the backing of President Uhuru Kenyatta, has vowed to “restructure and re-profile Kenyan debt portfolio” to ease the burden on future generations.
He has further pledged to “aggressively pursue debt relief negotiations” with creditors if elected president.
“[We will] ensure that all debts are procured only for purpose of viable projects that will finance the repayments and debt servicing and secure inter-generational equity,” Mr Odinga said while launching the party’s manifesto Monday night.
While welcoming Mr Odinga’s debt management plan as one likely to free part of the more than Sh1 trillion that Kenya is projected to spend on debt repayments, macroeconomic analysts said the success of the plan will largely hinge on deals with rich countries.
“The restructuring talks will be difficult to execute and also dependent on the creditor type.
“The window for wholesale relief for a middle-income country such as Kenya won’t fly with some creditors,” said Churchill Ogutu, an economist who covers Kenya, Uganda, Tanzania and Rwanda for IC Asset Managers (Mauritius).
Kenya’s total debt crossed the Sh8.4 trillion mark last March, comprising Sh4.21 trillion owed to foreign creditors and Sh4.19 trillion to domestic creditors.
President Uhuru Kenyatta’s administration has relied on loans to build much-needed roads, bridges, power plants and the standard gauge railway since they, together with his Deputy William Ruto, took power more than nine years ago.
Public debt has ballooned from Sh1.89 trillion the Jubilee administration inherited from President Mwai Kibaki [deceased] to a projected Sh8.59 trillion by end of this fiscal year in June.
The expiry of a grace period on debt is extended largely by foreign lenders such as China has in recent years piled pressure on taxpayers. For example, the Treasury has projected debt servicing costs this financial year ending this month at Sh1.15 trillion — an equivalent of 66.12 percent of targeted Sh1.74 trillion tax receipts.
“The best chance is to have restructuring with the bilateral creditors, but at best I think it may require renegotiating the financing terms (maturity and interest costs) to alleviate debt service costs,” said Mr Ogutu.
“For multilateral lenders, they issue loans at concessional terms and there’s no meaningful impact in restructuring that stock of debt while Eurobonds may be difficult as it entails having discussions with the heterogeneous lot of investors, which is a herculean task.”
Mr Odinga’s main rival will be Deputy President William Ruto who defended the administration’s borrowing spree in the past but has since changed tune after falling out with Mr Kenyatta.
