Access to International Monetary Fund (IMF) and World Bank loans has helped Kenya reduce its exposure to commercial debt, easing repayment pressure at a time Covid-19 has hit the country’s coffers and exposed debt vulnerabilities.
A debt review by the IMF shows that Kenya’s multilateral lender loans increased from $10.2 billion in 2019 to $13.7 billion in 2020, growing their share of Kenyan external debt from 33.4 percent to 39.7 percent within the period.
On the other hand, the proportion of commercial debt has reduced from 33.1 percent ($10.2 billion) to 25.9 percent ($8.9 billion).
Kenya has also managed to stretch repayment of local loans from 5.75 years to 7.9 years in key reforms by the public debt office to address refinancing risk. About half of government domestic debt securities are held by commercial banks, followed by pension funds.
“On debt, the authorities are pursuing a financing strategy that balances domestic and external financing and utilises concessional financing where available. They are also taking steps to extend the maturity of domestic debt,” IMF Executive Director, Ita Mary Mannathoko said.
In 2013 only seven percent of external debt was commercial, 27 percent was bilateral and 64 percent was borrowed from multilateral sources.
Foreign loans currently amount to Sh3.7 trillion, which make up half of Kenya’s total debt of Sh7.4 trillion and are at risk of going up every time the shilling depreciates against the dollar.
Commercial debt (mainly Eurobonds and syndicated loans) accounted for about 26 percent of external public debt at end-2020 — modestly above its share at end-2015. Eurobonds account for 70 percent of commercial debt ($6.1 billion), while syndicated loans represent 27 percent (about $2.5 billion).
In the coming fiscal year, a significant share of financing is expected to come in the form of concessional and semi-concessional borrowing, including from the IMF and other multilaterals as part of Treasury plan’ to limit reliance on external commercial borrowing.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
