This archive report was first published on 5 May 2020.
As the COVID-19 pandemic continues to affect economies worldwide, Kenya is seeking debt relief options with lenders to mitigate its negative impacts. According to Treasury Principal Secretary Julius Muia, talks are underway with creditors, both bilateral and multilateral, to delay payments due this year.
"There are some who have given us an indication that they will forgo interest and principal in the calendar year. We are negotiating, but what we are not doing is rescheduling," Muia said in an interview with Bloomberg.
One proposal being pursued by the government is from The Actuarial Society of Kenya (TASK), which suggests freezing interest payments on pension assets for a period of two years. This would save the government KSh60 billion a year, which could be spent on food and income security, as well as enhancing medical infrastructure, according to Muia.
TASK also proposes that the National Social Security Fund offers the state a "soft loan" of KSh25 billion, although the terms of the loan are not specified.
Kenya's pension funds hold about 30% of the country's KSh3 trillion domestic debt, with assets worth KSh1.3 trillion as of 2019. The government estimates that debt-service costs will increase to KSh904.7 billion in the fiscal year beginning July 1, from KSh805.2 billion in the current year.
Kenya is not alone in seeking debt relief. Rwanda is also negotiating with lenders to delay repayments and use the money to stimulate economic activity. The G20 countries have announced plans to suspend both principal repayments and interest payments on loans for the world's poorest countries, with the waiver lasting until the end of the year.
Additionally, the Paris Club Creditors have agreed to cancel 67% of Somalia's debt, translating to $1.4 billion. The UNCTAD is urging for the writing off of close to $1 trillion debt owed by developing countries across the world.
