Kenya’s debt repayment costs jump by Ksh53.7B
Kenya’s debt repayment costs in the year ending on June 30 have shot up by Ksh.53.7 billion in spite of relief on external repayments.
According to adjustments in the Consolidated Fund Services (CFS) in Treasury’s first 202/21 supplementary budget, the unprecedented rise in debt costs is as a result of greater domestic debt repayments.
While the exchequer did not disclose the sudden rise in local redemption’s, the higher debt servicing costs limits Kenya’s gains from its participation in the Debt Service Suspension Initiative (DSSI).
Debt costs to June now stand at Ksh.958.4 billion on the back of a Ksh.131.6 rise in lcal interest and redemption costs.
Costs on local interests have shot up by Ksh.31.6 bilion while redemption’s’ have soared by Ksh.100 billion limiting gains from the partial freeze on external payments.
In contrast, the National Treasury has booked savings of Ksh.77.8 billion from the DSSI initiative to include a Ksh.35.9 billion slide in external interest payments and Ksh.41.9 billion in redemption’s.
Elevated debt repayment costs are expected to pack more pressure on the country’s debt position which was exacerbated by dipping tax revenues following the emergence of the COVID-19 pandemic.
Rising debt repayment costs are expected to feature across the medium term with estimated payments across the 2023/24 financial year estimated at Ksh.1.4 trillion.
The growth in debt costs is expected to see a bloated CFS which will top Ksh.1.6 trillion in June 2024 from the current Ksh.1.1 trillion this year.
As part of efforts to cushion against the rising debt serving costs, Kenya will be seeking an extension of the DSSI program beyond June 30 this year when the International Monetary Fund (IMF) and the World Bank hold their annual spring meetings in May.
Nevertheless, Kenya will regret its late entry to the DSSI program having only joined the initiative in January this year to miss out on the full complement of savings from the June 2020 initiative.
Kenya was granted the suspension of Ksh.32.9 billion in repayments falling due between January and June 2021 to 10 countries represented in the Paris Club.
Additionally, Kenya sought a similar relief from G20 member countries with China being the fast from the group to confirm the suspension of Ksh.27 billion in scheduled repayments.