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StanChart tips Kenya to weather debt overhang

StanChart
StanChart says that Kenya has foreign exchange reserves above $8 billion. FILE PHOTO | NMG 

The National Treasury will comfortably manage its maturing debt obligations this year despite the expected increase in debt redemptions, Standard Chartered Bank analysis suggests.

The UK global research team says in the latest country briefing that despite the elevated debt service obligations in 2019, Kenya can comfortably weather any distress by encouraging offshore participation in its domestic financing needs.

“We expect Kenya to be able to comfortably manage its debt obligations, despite the anticipated surge in debt service payments in 2019.

Given the ease of foreign borrowing in recent years, Kenya has not made the most of its domestic financing capability,” says the research.

StanChart says that Kenya has foreign exchange reserves above $8 billion and current account receipts are estimated to rise to at least $20 billion in 2019 on strong remittance and tourism growth, giving the country some comfort.

The optimism is despite total debt service set to account for an even larger share of revenue this year.

The ratio of debt service to exports is estimated at 75.8 percent in 2019, almost doubling from 39.6 per cent in 2018.

The initial five-year grace period extended by the Export-Import Bank of China for the Standard Gauge Railway ends in May. Debt redemptions related to other infrastructure projects are also likely to rise.

The average maturity of Kenya’s domestic debt, about five years, is comfortable versus peers and can be extended further, according to StanChart.

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