(African Budgetary Series) Solving Kenya’s Debt Puzzle

Solving Kenya's Debt Puzzle

In May 2017, the International Monetary Fund (IMF) declined to raise Kenya’s precautionary credit facility above its current level of $1.5 billion USD citing short term shocks to the economy. The IMF saw decreasing private sector investment, looming fiscal consolidation, budgetary deficits, as well as political uncertainties as some of the reasons for the refusal.

The National Treasury is mulling the option of taking out a syndicated loan before tapping capital markets for a second Eurobond. The first Eurobond, issued in 2015 worth $750 million USD, was due in October 2017; yet was extended for 6 months after refinancing negotiations. The National Treasury has stated that the aim of the second Eurobond would be principally used to repay the first.

Solving Kenya's Debt Puzzle


Kenya’s short-term debt problems are mounting.

In March 2017, it took out a syndicated loan of $800 million USD from a consortium of 4 banks: Standard Charter, Standard Bank, Citi and Rand Merchant. The syndicated loan matures in 2 years and carries 5.7% interest.

In addition, the Chinese government lent $986.9 million USD (read Quartz report on China’s role in Kenya’s economy), while $450 million USD was borrowed from the Preferential Trade Area and the African Export Bank.

Sources: Lean Words and National Treasury

Moody’s and Fitch ratings agencies have threatened to downgrade Kenya’s credit rating due to increasing debt servicing costs and rising deficits.

The recent borrowings are at least partly intended to reduce the fiscal imbalance, with Kenya’s current deficit at 9.2% of GDP.

While the government has not been able to address revenue-raising issues that remain low relative to government expenditures, credit agencies are expecting the deficit to decrease over the next few years as it plans to take austerity measures to reduce expenditures.

Sources: Lean Words and National Treasury


The African Budgetary Series (ABS) offers regular, analytical insight into African economics. We provide a refreshing and objective look into issues that are driving African economies. Questions or comments? We`d love to hear from you

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