Economy

Kenya now eyes Sh69bn debt service suspension

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Treasury building. FILE PHOTO | NMG

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Summary

  • Kenya has widened its debt service relief request to all its bilateral lenders, hoping to save Sh69 billion, the National Treasury has said.
  • The move comes days after a decision by the Paris Club of international decision to give Kenya a Sh32.9 billion loan repayment break to help ease the financial distresses linked to Covid-19.

Kenya has widened its debt service relief request to all its bilateral lenders, hoping to save Sh69 billion, the National Treasury has said.

The move comes days after a decision by the Paris Club of international decision to give Kenya a Sh32.9 billion loan repayment break to help ease the financial distresses linked to Covid-19.

The Treasury said Nairobi had expanded the bid for reprieve from servicing its looming debt payment obligations under the landmark debt relief initiative – known as the Debt Service Suspension Initiative (DSSI) – that came from the G20 grouping of the world’s largest economies – spurred on by the International Monetary Fund ( IMF) and World Bank – last April.

The G20 nations agreed to freeze bilateral government loan repayments for 76 low-income countries until the end of the year and called on private sector creditors to participate on a voluntary basis.

"We have engaged all bilateral creditors. The projected DSSI relief is Sh69 billion," Treasury Principal Secretary Julius Muia told the Business Daily in interview.

He added that Nairobi is also engaging Beijing, which is Nairobi's largest bilateral creditor under the framework.

China has been funding billions of shillings worth of infrastructure including the standard gauge rail-line between Nairobi and Mombasa via debt.

"Kenya has applied for DSSI. China is one of Kenya's bilateral creditors. In line with procedure, we are discussing our DSSI with all bilateral creditors," said Dr Muia.

The G20 backed debt relief initiative is, however seen to have two key main problems according to observers.

While China which is Kenya's largest bilateral creditor is a G20 member and a signatory to the deal, a large proportion of its loans to Kenya have been made on a commercial basis by government agencies, quasi-public corporations and by state-owned banks, such as China Development Bank and Exim Bank of China.