Kenya’s dollar-denominated loans have soared by 17.6 percent since 2013 on the weakness of the local currency, according to an analysis by the Controller of Budget (COB).
The disclosure reveals the effect the depreciation of the shilling against the major world currencies has in increasing the public external debt stock.
“The depreciation of the Kenya shilling against the major world currencies has increased the public external debt stock. For instance, dollar-denominated debt has grown by 17.6 percent due to currency depreciation over the last ten years,” the COB stated.
“The exchange rate was Sh86.31 against the US Dollar in December 2013 and Sh148.10 against the US Dollar in September 2023. Data from the National Treasury shows that over 60 percent of external debt is denominated in US Dollars, indicating the high level of exposure of total debt to foreign currency fluctuations.”
Kenya’s dollar-denominated debt had grown to an equivalent of Sh3.6 trillion as of June.
The shilling has shed an average of 20 percent of its value against the US dollar since the turn of the year with the weakness being attributed to the correction of the unit’s previous overvaluation according to the National Treasury and the Central Bank of Kenya (CBK).
The depreciation has resulted in a bloated stock of dollar-denominated debt while increasing periodic interest payments on the arrears.
Secondary data from the National Treasury shows 67.2 percent of Kenya’s external debt as at the end of June was denominated in US dollars or an estimated Sh3.6 trillion.
