Kenya is planning to roll over a syndicated loan totaling 78 billion shillings in the 2018 financial year in a bid to ensure manageable repayment, says the Treasury.
Although no agreements have been made yet, senior officials from the Treasury said that they are looking to convince the lenders to extend the repayment period to allow the government to be in a better position of repaying the loan.
Initially, the loan, which was arranged by Trade and Development Bank, carried a maturity period of two years but the government intends to extend the loan’s tenor to between 7 and 10 years stated Kamau Thugge, the Principal Secretary of the National Treasury.
According to Thugge, the government will be going back to the international market to extend the maturity of the loan, which is falling due. He assured Kenyans that the roll-over will not increase the country’s debt.
Meanwhile, the country is showing signs of what the International Monetary Fund projected; that Kenya is likely to default on loan repayment if it doesn’t implement appropriate measures for its settlement.
The country is said to be eyeing a new Eurobond aimed at raising 272 billion shillings in net financing encompassed in the current financial year ending mid-2019. Although the loan will be less costly compared to the previous ones, the borrowing continues to perturb many across the country.
Kenya’s growing appetite for borrowing, which has left it with a fiscal deficit of 7 percent as shown by the last financial year that ended in June 2018 is likely to affect its Gross Domestic Product in the next financial year.
According to the treasury, the 2019/2020 budget deficit is likely to drop to 4.7 percent of the GDP against the 5.8 percent that was revised in the current fiscal year.
Speaking at a public hearing addressing the country’s deficit, Thugge noted that Kenya’s budget by 2022/2023 is likely to fall to 2.8 percent of the GDP.
These developments all indicate that Kenya will spend about 2.81 trillion shillings in the next fiscal year contrary to the 2.47 trillion shillings that was revised this year.
Currently, of the total bilateral debt of 756.28 billion shillings Kenya owes lenders, China’s loan alone stands at 554.88 billion shillings. No wonder Moody’s, the global rating firm, has warned that the country might lose key infrastructure to China.