This archive report was first published on 17 May 2020.
East African countries have been hit with a massive debt burden, with nearly $2.3 billion in new loans borrowed in less than three months since the first Covid-19 case was reported.
According to reports, the International Monetary Fund (IMF) has been the biggest source of these loans, with Kenya, Uganda, and Rwanda being the top borrowers.
Kenya has borrowed an estimated $1.5 billion, followed by Uganda with $540.2 million, and Rwanda with $223.65 million.
President John Magufuli of Tanzania has called for the cancellation of his country's foreign debts, but so far, Tanzania, Burundi, and South Sudan have not announced any new loans during this period.
The estimated $2.26 billion new debt adds to the over $110 billion loans that EAC countries were holding at the onset of the pandemic.
Experts warn that the impact of this new debt on the economies will be huge, with export earnings and diaspora remittances in trouble, and local currencies under pressure.
"The impact of this new debt on the economies is going to be huge. Export earnings and diaspora remittances are in trouble. Local currencies are going to be under a lot of pressure and when they depreciate then our debts, which are largely denominated in foreign currency become very expensive. That is a big issue," said Nikhil Hira, a director and tax consultant at Kenya-based law firm, Bowmans.
The EAC agreement on debt ratios provides that member countries' loans should not exceed 50 per cent of their respective gross domestic product (GDP).
However, the growing public debt-to-GDP ratios have left Burundi, Kenya, Rwanda, Tanzania, and Uganda highly exposed to greater rollover and exchange rate risks, according to IMF analysis.
With export earnings in free fall and diaspora remittances drying up as a result of Covid-19, regional governments will find it difficult to repay and service their loans, which are now largely commercial and foreign denominated.
Kenyan President Uhuru Kenyatta and his Ugandan and Rwandan counterparts, Yoweri Museveni and Paul Kagame respectively, have called for a foreign debt repayment holiday to save on finances that will be required for the reconstruction of economies already battered by the deadly disease.
As of Friday, the virus had infected over 4.4 million people globally and killed over 300,000.
Kenya has reported the highest number of infections among EAC members with 830 positive cases, followed by Tanzania with 509 patients, Rwanda with 286, South Sudan with 235, Uganda with 203, and Burundi with 15.
Kenya has turned to the IMF ($739 million), the World Bank ($6.6 million), and the US government to finance its Covid-19 response, while Rwanda has borrowed $109.4 million from the IMF and $100 million from the World Bank.
