After finding out that potential benefits might overweigh the risks, Kenya has changed its mind about joining a G20 debt relief initiative according to CS Treasury.
In May, Kenya said it would not seek suspension of debt payments under the G20’s Debt Service Suspension Initiative (DSSI), aimed at helping poor countries weather the COVID-19 pandemic, citing restrictive terms.
According to Yatani, the country has been reluctant in the past because of the attendant unintended consequences in terms of those holding private debt. “But now after getting a bit of assurance that it is a matter that can be managed, we are now strongly considering joining the arrangement”.
Kenya’s Finance Minister CS Ukur Yatani said the country is now planning to defer around $690 million (75, 479,100,000 Shillings) in debt payments.
Yatani added that joining the arrangement was also important for Kenya as it will help open doors for further funding from the International Monetary Fund and World Bank.
Treasury CS Ukur Yatani said a decision to join the initiative had been made in principle, and a final decision would be made as early as next week.
Meanwhile, Kenya’s National Treasury expects the country’s debt to rise to Ksh.10.4 trillion by the end of June in 2024 from the present stock of Ksh.7.1 trillion.
According to a report released, the higher debt stock will set against the recently revised public debt ceiling of Ksh.9 trillion by the National Assembly with the limit being surpassed long before June 2023 when the stock of debt is projected to stand at Ksh.9.4 trillion.
Impacting factors like COVID-19 and other weaknesses have affected the economy and according to the 2019/20 Public Debt Management Report by the National Treasury tabled in Parliament earlier this month reveals elevated debt risks.
“Kenya’s debt remains sustainable. The risk of external debt distress has moved from high to moderate due to the impact of the global COVID-19 crisis which worsened existing vulnerabilities,” the National Treasury noted in the report.
According to the debt service projection, Kenya will require Ksh.1.1 trillion to pay debts in the 2023/24 financial year from the current Ksh.642.7 billion in the year to June 2021 or an equivalent 36.1 percent of revenues.
A report released in October indicated that Kenya borrowed 374 billion shillings in two months, July and August pushing the country’s total public debt to more than 7 trillion shillings by the end of August 2020.