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Country <strong>Debt</strong> <strong>Guide</strong><br />
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Kenya<br />
Current Financing Challenges<br />
Although Kenya is classified as a middle-income country, as noted above the IMF does assess Kenya’s debt<br />
position, and has in 2020 revised this to be at high risk of debt distress. According to the Jubilee debt campaign’s<br />
assessment, Kenya is at risk of a public debt crisis in 2020. The Kenyan government devoted 14% of total<br />
government expenditure to paying the interest on its debt in 2018, nearly double its share of healthcare<br />
expenditure, which could represent a potentially high opportunity cost IF the projects being funded by loans are<br />
not helping raise Kenyan citizen’s standards of living or generating a return. That said, Kenya still has some longterm<br />
financing needs in order for the population to achieve basic standards of life and poverty reduction, in<br />
particular ensuring access to water. It may or may not be able to meet these through domestic financing alone.<br />
WHAT DOES KENYA STILL NEED TO FINANCE?<br />
SOME EXAMPLES:<br />
ACCESS TO ELECTRICITY FOR 25% OF THE POPULATION<br />
ACCESS TO DRINKING WATER FOR 41% OF THE POPULATION<br />
ACCESS TO INTERNET FOR 13% OF THE POPULATION<br />
IMPROVING PORT INFRASTRUCTURE BY 2% TO REACH CHINESE LEVELS<br />
IMPROVING ROAD INFRASTRUCTURE BY 10% TO REACH CHINESE LEVELS<br />
The average interest rate on Kenya’s external debt commitments has risen in recent years, growing over four-fold<br />
to 5.8% in 2018 compared to 2013. This can be attributed to the greater use of commercial debt as a financing<br />
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tool, representing a third of Kenyan external public debt as of late 2019.<br />
Since the mid-2010s, Kenya has issued sovereign Eurobonds and syndicated loans, raising over $7 billion. As a<br />
result, concessional loans – comprising bilateral and multilateral loans that accounted for 90.7% of total external<br />
debt in mid-2013 – have since declined in relative importance within Kenya’s loan portfolio. In line with this<br />
development, the treasury amended regulations, changing the definition of the national debt ceiling from 50% of<br />
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GDP to a larger absolute value of 9 trillion shillings. This gives Kenya more scope for commercial debt financing<br />
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but also exposes the country to heightened risk, including vulnerability to exchange rate fluctuations.<br />
Nevertheless, Kenya’s credit rating is the fourth strongest amongst the countries analysed in this guide.<br />
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The COVID19 Impact<br />
Due to the COVID-19 pandemic, by September 2020 the government in Kenya had budgeted $1.7 billion (2% of<br />
GDP) on Covid-19 health and economic recovery. Social assistance to the vulnerable was largely delivered<br />
through existing cash transfer programmes that were intended to reach 1 million people across the country, 1.9%<br />
of the population. Kenya has also supported key sectors with extra financing as a stimulus package, and made<br />
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reductions in corporate and income tax. Despite this, Kenya’s economic growth is forecast to slow to 0.6% in<br />
2020 according to the African Development Bank’s ‘worst case’ scenario. Kenya is not heavily dependent on<br />
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pandemic-stricken economic activities, such as oil production (being a net petroleum importer), tourism<br />
(accounting for 18% of exports, above the continental average but below the highest quartile) or remittances<br />
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(representing less than 4% of GDP). Efforts to rein in the deficit have to be put on hold, however, because higher<br />
health expenditure and stimulus packages are projected to raise the fiscal deficit to 8.4% of GDP - the third<br />
highest amongst all countries analysed in this guide - while public debt is expected to rise to 68% of GDP in 2020.