Kenya saves Ksh.60 billion from debt service suspension

Kenya saved a cumulative Ksh.59.7 billion ($503.8 million) from its participation in the debt service suspension initiative (DSSI) last year.

New disclosures from a report by the International Monetary Fund (IMF) show Ksh.50.2 billion ($423.5 million) was saved from the first phase of the initiative which ran between January and June last year.

Savings from the DSSI program however narrowed sharply to just Ksh.9.5 billion ($80.3 million) in the second half of the year as non-Paris Club creditors who include China pulled the plug on their support for the initiative.

During the period, Kenya had hoped to save a total of Ksh.44.9 billion ($379) million from the participation of all bilateral creditors in the initiative.

Moreover, Kenya could have made more savings from the program were it not for its late entry into the DSSI program which commenced in June 2020.

Kenya had dilly dallied on the debt service suspension window as it analysed the implications of joining the initiative which at the time included the risk of credit rating agencies deeming participation as a technical default by the country on its debt obligations.

The DSSI, which had the support of G20 countries and multi-lateral lenders such as the World Bank and the IMF, sought to free up funding for countries and address debt vulnerabilities arising from the COVID-19 pandemic.

Kenya agreed to take up the debt service suspension offer in January last year from which Ksh.32.9 billion in savings were realized from the participation of 10 bilateral creditors under the Paris Club.

Savings made under the deal binding the 10 creditors are to be repaid from 2025.