Kenya was ranked fourth with high interest payments as a share of export earnings by International Development Association (IDA), the soft loan affiliate of the World Bank, which helps the world’s poorest countries.
Recent data from International Debt Report by World Bank reveals, Mozambique led with 38.3 percent, followed by Senegal at 25.9 percent. Other countries include Pakistan at 13.6 percent, Kenya (12.8 percent) and Dominica (10.3 percent).
This means that interest payments on external debt consumed an increasingly large share of Kenya’s export earnings.
Established in 1960, the IDA aims to reduce poverty by offering highly concessional or interest-free loans and grants for programmes that boost economic growth, reduce inequalities and improve people’s living conditions.
“For IDA-eligible countries, interest payments as a share of export earnings, a measure of the repayment capacity of a country, significantly increased by 1.6 percentage points in 2023 to 5.8 percent, equivalent to an increase last recorded in 2005,” the report notes.
According to the debt report such high ratios of interest payments as a share of export earnings, have a ramification as they weaken the fiscal positions of these countries. Notably, Kenya’s debt service charges on external debt more than doubled from Sh403 billion to Sh839 billion in 2023.
The increase in such costs translates to shifting scarce resources away from providing critical needs such as education and health among others to cater for debt servicing.
Commercial loans accounted for the largest share of interest payments at Sh102.76 billion, followed by China (Sh52.2 billion), IDA (Sh22.29 billion), ADB(Sh13.99) and IMF (Sh11 billion).
“For IDA-eligible countries, interest payments on total debt stock have tripled since 2013 to high of $34.6 billion in 2023,” World Bank noted.
Kenya’s external debt service grew by 87.9 percent to Sh755.9 billion due to maturity of Eurobond 2024.
