International Bank Issues Alert on Kenya’s Debt Crisis

In an interview with Bloomberg, the Bank’s head of African research Jibran Qureishi warned that the country would suffer debt risks in the next two years.

He noted that the risks would come about as the the stimulus extended to poor countries comes to an end with the world recovering from the pandemic.

Kenya was named among four other countries including Ghana Angola, Ethiopia and Zambia.

According to data provided by the Bank, which has been billed as Africa’s biggest lender, Kenya is considering a Ksh114 billion loan from Eurobond in the first six months of 2022.

Qureishi also revealed that the country had accumulated a huge debt, especially commercial loans pushing the foreign-exchange reserve costs to 35 per cent.

Servicing the loan also takes 43 per cent of the country’s revenue in form of taxes.

The upcoming 2022 elections is also likely to worsen the debt risk in the country as it is expected to slow down efforts in controlling the country’s borrowing.

Kenya, is however, less risky as compared to some countries on the list like Ghana which has been placed in the red after its continued refusal to seek a loan from the International Monetary Fund (IMF).

Qureishi explained that Ghana needs the loan in order to boost confidence in the country’s investors failure to which the Eurobond financing strategy may not work when US Federal Reserve increases interest rates.

“If this doesn’t transpire, the government would have to rely on an improving fiscal position which may be difficult to achieve in 2022 given overly ambitious tax revenue expectations,†Stated Qureishi.

In November 2021, President Uhuru Kenyatta launched plans seeking for a new Ksh106 billion loan.

The loan will fund Uhuru’s successor in their first budget in office. The fifth President is expected to be elected into office in August 2022, two months after 2022/2023 budget estimates are unveiled by the National Treasury. 

On November 5, IMF had allowed Kenya to withdraw Ksh29.4 billion from the Ksh255 billion loan it issued in April 2021. 

Treasury CS Ukur Yatani presented the 2021/2022 budget on Thursday, June 10, 2021

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