Geza Ulole
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MF raises Kenya’s loan default risk from low
Oct. 25, 2018, 12:30 am
By VICTOR AMADALA and REUTERS
Passengers at the Nairobi terminus going to board the SGR passenger train to Mombasa on Thursday.
Kenya’s risk of debt default went up yesterday after the International Monetary Fund (IMF) raised the country’s vulnerability from low to moderate.
Reuters reported that the Washington-based lender cited Kenya’s high debt obligation that has eaten heavily into its fiscal plan as key exposure to default.
“The higher level of debt, together with rising reliance on non-concessional borrowing, have raised fiscal vulnerabilities and increased interest payments on public debt to nearly one fifth of revenue, placing Kenya in the top quartile among its peers,” the IMF said in a report released late on Tuesday.
IMF forecast Kenya’s total public debt will reach 63.2 per cent of economic output or GDP this year then begin declining. Public debt was 58 per cent last year and 53.2 per cent in 2016. The IMF recommended Kenya’s Treasury refinance loans at longer maturities to limit refinancing risks.
The lender’s verdict on Kenya’s default status marries a recent study by World Bank which ranked Kenya among 14 sub-Saharan countries that will struggle to pay their loans post 2021.
According to the global lender, Kenya will have a higher debt servicing obligation for the first Sh280 billion Eurobond issue in 2014 in five and 10-year tranches.
The first five year tranche expected to cost tax payers Sh97.71 billion will be paid next year while the second phase of Sh400 billion will be due in 2024. In February, Treasury announced raising Sh202 billion in a new sovereign bond issue whose proceeds were used to retire a syndicated loan of Sh101 billion from a consortium of banks last year.
The bond was issued in two equal tranches of 10 and 30 years for an annual interest rate of 7.25 per cent and 8.25 per cent respectively. They are expected to mature in 2028 and 2048.
Last month, Standards and Poor’s rated Kenya’s fiscal and debt burden as weak, exposing the country’s poor credit profile to external lenders.
Although the global rating agency affirmed Kenya’s long and short-term currency sovereign credit ratings at B+/B’, indicating a stable outlook, it gave the country’s debt burden a score of five on a scale of one (strongest) to six (weakest).
Kenya’s public debt has been rising especially on infrastructure financing led by the Standard Gauge Railway and currently stands at Sh5.03 trillion.
IMF raises Kenya’s loan default risk from low
Oct. 25, 2018, 12:30 am
By VICTOR AMADALA and REUTERS
Passengers at the Nairobi terminus going to board the SGR passenger train to Mombasa on Thursday.
Kenya’s risk of debt default went up yesterday after the International Monetary Fund (IMF) raised the country’s vulnerability from low to moderate.
Reuters reported that the Washington-based lender cited Kenya’s high debt obligation that has eaten heavily into its fiscal plan as key exposure to default.
“The higher level of debt, together with rising reliance on non-concessional borrowing, have raised fiscal vulnerabilities and increased interest payments on public debt to nearly one fifth of revenue, placing Kenya in the top quartile among its peers,” the IMF said in a report released late on Tuesday.
IMF forecast Kenya’s total public debt will reach 63.2 per cent of economic output or GDP this year then begin declining. Public debt was 58 per cent last year and 53.2 per cent in 2016. The IMF recommended Kenya’s Treasury refinance loans at longer maturities to limit refinancing risks.
The lender’s verdict on Kenya’s default status marries a recent study by World Bank which ranked Kenya among 14 sub-Saharan countries that will struggle to pay their loans post 2021.
According to the global lender, Kenya will have a higher debt servicing obligation for the first Sh280 billion Eurobond issue in 2014 in five and 10-year tranches.
The first five year tranche expected to cost tax payers Sh97.71 billion will be paid next year while the second phase of Sh400 billion will be due in 2024. In February, Treasury announced raising Sh202 billion in a new sovereign bond issue whose proceeds were used to retire a syndicated loan of Sh101 billion from a consortium of banks last year.
The bond was issued in two equal tranches of 10 and 30 years for an annual interest rate of 7.25 per cent and 8.25 per cent respectively. They are expected to mature in 2028 and 2048.
Last month, Standards and Poor’s rated Kenya’s fiscal and debt burden as weak, exposing the country’s poor credit profile to external lenders.
Although the global rating agency affirmed Kenya’s long and short-term currency sovereign credit ratings at B+/B’, indicating a stable outlook, it gave the country’s debt burden a score of five on a scale of one (strongest) to six (weakest).
Kenya’s public debt has been rising especially on infrastructure financing led by the Standard Gauge Railway and currently stands at Sh5.03 trillion.
IMF raises Kenya’s loan default risk from low
