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Kenya’s Risk of Distressed Debt Is Growing

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The International Monetary Fund raised Kenya’s risk of debt distress to high from moderate due to the impact of the Covid-19 shock. Bloomberg reported.

While the East African economy’s debt load remains sustainable, indicators such as the present value of external debt-to-exports and external debt service-to-exports have worsened, the IMF said in an assessment on its website after the government requested disbursement under the Rapid Credit Facility in April. The lender last week approved $739 million to support Kenya’s response to the pandemic.

“It is important that the authorities resume their fiscal consolidation plans to reduce macroeconomic vulnerabilities once the crisis abates,” the IMF said.

Key Debt Statistics:

  • Kenya’s gross public debt increased to about 61.7% of gross domestic product at end-2019, from 50.2% at the end of 2015, the IMF estimates.
  • The debt is almost evenly split between external and domestic. While the foreign component is mainly concessional, Kenya has been increasing commercial loans.
  • Existing Eurobonds of $6.1 billion accounted for 60% of commercial debt at the end of 2019. The state took on a $250 million 10-year syndicated loan in January 2019 and a nine-year $1.25 billion syndicated loan in the following month for refinancing purposes.
  • “As Kenya generally had enjoyed strong access to the international capital markets, staff projections assume resumption of market access once global capital markets reopen to frontier market issuers and additional Eurobonds will be issued to meet financing needs and maintain a market presence,” the IMF said.
  • Kenya’s total obligations to the IMF would be at 12.3% of gross international reserves, 10.2% of exports, and 0.9% of GDP in 2020, the lender said.

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