Kenya will work to reduce its debt burden as it seeks to secure a new standby loan facility with the International Monetary Fund, despite reports it has increased its debt ceiling, acting finance minister Ukur Yatani told GlobalMarkets.
Kenya is working on an “elaborate roadmap” to manage its debts, which includes retiring short-term commercial loans and increasing concessional funding, as it looks to finance the country’s vast infrastructure needs.
At around 60% to its gross domestic product, Kenya’s debt levels are notably higher than the 55% level beyond which the IMF considers there to be a strong risk of debt distress, raising concerns about its ability to service the debt load. These concerns were exacerbated by reports that Kenya’s parliament recently approved an increase in the country’s debt ceiling to some $87bn.
Kenya has held long term talks with the IMF on a new standby loan facility and negotiations are expected to conclude this year. “We are keen to be engaging directly in a programme with them, so they support and complement our [efforts],” said Yatani.
Kenya has borrowed large amounts to finance infrastructure projects, with big amounts coming from China as part of its Belt and Road Initiative. The government is focussed on improving the sustainability of its debt stock, and on securing concessional funding from multilateral partners such as the IMF, Yatani said. It will focus on green and sustainable development projects.
While infrastructure spending remains a key priority, Kenya is looking at ways to finance development more sustainably, reducing its debt load by replacing expensive short-term commercial loans with more concessional terms. “We have an elaborate roadmap on managing our debts and we are focussed on making sure we go the concessional way with multilateral organisations, [as well as] trying to retire some expensive commercial debt,” he said.
Kenya may also turn to the capital markets to raise funding at a lower price though has no imminent plans to return to the bond market after issuing a $2.1bn Eurobond in May this year. Proceeds of any new bond will be used for debt management and to pay down expensive debts, rather than for spending, he said.