This archive report was first published on 9 June 2020.
IMF Warns Kenya on Debt Crisis ¶
Published on June 9, 2020
The International Monetary Fund (IMF) has advised Kenya to seek the release of over Sh1 trillion in donor pledges to avoid further debt troubles.
The IMF made the warning after releasing nearly Sh75 billion to support Kenya's budget implementation following the COVID-19 crisis.
According to the IMF, Kenya's debt has moved from a moderate to a high level of distress due to a spate of borrowing from both external and internal sources in recent years.
The multilateral lender noted that Kenya has about $10 billion (Sh1.06 trillion) of committed but undisbursed official development assistance.
“To avoid commitment fees on undisbursed funds and reduce reliance on commercial financing, measures should be taken to unblock this low-cost financing,” the IMF said.
The IMF also encouraged Kenya to strengthen its debt management capacity to manage and prepare for large repayments on commercial borrowing.
At the same time, the IMF advised Kenya to continue to play an important role in financing investment projects through concessional borrowing due to its lower cost and longer maturity profile.
The IMF estimated that the pandemic will push up total public debt from about 61.7 percent of the gross domestic product (GDP) at the end of 2019 to 69.9 percent in 2022 but could decline thereafter.
Kenya's public debt remains sustainable, but the downgrade in the debt risk rating is a consequence of the impact of the global COVID-19 crisis which has made vulnerabilities worse.
