Kenya takes Ksh.70 billion debt hit from weaker Shilling

Kenya’s external debt rose by an estimated Ksh.70 billion between January and April this year on account of a weaker Kenyan Shilling.

A new analysis of the country’s public and publicly guaranteed debt by Sterling Capital has revealed the hole caused by a weaker local currency.

According to data from the National Treasury and the Central Bank of Kenya (CBK), the stock of external debt when expressed in dollar terms declined by 0.7 per cent to $36.65 billion from $36.9 billion indicating an overall decline in external debt.

Nevertheless, when expressed in Kenya Shilling terms, external debt grew by 1.7 per cent across the four months to Ksh.4.244 trillion from Ksh.4.174 trillion at the end of 2021.

During the period January 1 to April 28, the Kenya shilling lost ground on the US dollar by 2.3 per cent to exchange at Ksh.115.77 at the end of the period from Ksh.113.14 at the start according to CBK data.

The data implies that for every one percent depreciation in the value of the Kenya Shilling, the country’s external debt grows by roughly Ksh.30.4 billion.

With the year-to-date depreciation of the Kenya shilling at 4.3 per cent, Kenya’s external debt is expected to have grown by a further Ksh.60.7 billion from just a weaker currency.

The size of Kenya’s external debt is meanwhile estimated to have grown further to June from the tapping of new external debt facilities in the intervening period.

According to data from the National Treasury monthly debt bulletin, the bulk of Kenya’s external debt or 67 per cent was denominated in US dollars at the end of April with other currencies in the composition being the Euro, Yen, Yuan and Sterling Pound.

During the month, the Kenya Shilling depreciated by 0.7 per cent against the US dollar but gained 5.5, 3.9, 3.2 and 3.3 percentage points against the Yen, Euro, Yuan and Sterling Pound respectively.

The bulk of the external debt at the end of the period was owed to multilateral lenders at Ksh.1.878 trillion while arrears to commercial lenders stood at Ksh.1.123 trillion.

Bilateral lenders were owed Ksh.1.086 trillion at the end of April with China being the largest creditor in the category at Ksh.785.6 billion.