With Major Repayments to China Coming Due, Kenya’s Debt Servicing Costs Gobble Up More of the National Budget

Beginning in July, Kenya’s debt repayment will cross the psychologically important barrier of 1 trillion shillings ($9.15 billion), according to the National Treasury, prompting renewed concerns over the country’s ability to sustain a debt portfolio that has doubled in size since 2017.

Debt servicing costs are now the government’s largest expense, consuming 57% of all tax revenue.

But while the numbers may sound alarming, Treasury Cabinet Secretary Ukur Yatani reassured the Senate Finance Committee on Monday that Kenya’s debt levels are still sustainable. Yatani noted that even with the big increase in borrowing, the country’s debt-to-GDP level remains at a relatively safe 66%.

Over the past several months, Kenya’s been working closely with its largest creditors, the World Bank and China’s two major policy banks (China Development Bank and China Exim Bank), to restructure some of its debts. But so far, they’ve only agreed to a series of debt deferrals that are set to expire this summer, but no debt write-offs or large-scale restructuring.

China’s Outsized Role in Kenya’s Debt Portfolio

  • NEARLY 1/3 OWED TO CHINA: Debt repayments to the China Development Bank and the China Exim Bank will account for 29.54% of the $3.7 billion external debt costs in the fiscal year 2021/22, according to the forecast by the Treasury.
  • BIG INCREASE AHEAD: The Treasury will spend Sh99.36 billion ($909.7 million) to service Exim Bank debt in the year starting July, a 132.84% surge compared with Sh42.67 billion ($391 million) in the current fiscal year ending June. The jump in debt obligations to China’s Exim bank partly reflects the Sh22.04 billion ($202 million) that was deferred this year as part of the debt relief.

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The post With Major Repayments to China Coming Due, Kenya’s Debt Servicing Costs Gobble Up More of the National Budget appeared first on The China Africa Project.



source https://chinaafricaproject.com/2021/02/23/with-major-repayments-to-china-coming-due-kenyas-debt-servicing-costs-gobble-up-more-of-the-national-budget/

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