Kenya earns extended break from external loan repayments

Kenya has successfully applied and received an extended break from external loan repayments to December 31.

The earned moratorium on interest payments booked on Tuesday is part of the final phase of debt service suspension initiative (DSSI) by Paris Club creditors and which has the backing of G20 countries.

“The representatives of the Paris Club creditor countries have accepted to provide the Republic of Kenya an extension of the time-bound suspension of debt service due from July 1 to December 31, 2021,” the Paris Club said in a statement.

“The government of the Republic of Kenya is committed to devote the resources freed by this initiative to increase spending in order to mitigate the health, economic and social impact of the COVID-19 crisis.”

Kenya has also committed to seeking a similar debt service suspension with its other bilateral official creditors.

The National Treasury could not immediately disclose savings earned from the extended DSSI offer.

A total of 11 creditors agreed to suspend Kenya’s debt obligations between January and June this year culminating in savings just shy of Ksh.60 billion.

The Paris Club which represents a group of elite lenders including Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Republic of Korea, Spain and the US allowed Kenya to skip Ksh.32.9 billion in repayments.

Meanwhile, China was the only non-Paris member to grant Kenya relief under DSSI terms having allowed the country to push the repayment of Ksh.27 billion.

Despite the desire to push savings to the containment of the pandemic, a March report by the Budget and Appropriations Committee (BAC) found little evidence that the founds had been ring-fenced.

This is even as local debt service costs appeared to swallow up gains from the external loan repayments freeze.

Kenya was late to the DSSI party having sat out of the initial phase of the initiative which commenced in July last year and only took up the offer in January this year.

The National Treasury has continued to dilly-dally around the offer as it measures savings earned against a potential future spike in repayments on external loans.

“For Kenya it’s not a significant amount. Payments that fell within the (DSSI) indicated period were not significant,” Treasury Cabinet Secretary Ukur Yatani said in a previous interview.

“We have applied savings from DSSI in implementing COVID-19 mitigation mainly in the health sector and also supporting our own budget to some extent by enhancing service delivery in the social sectors.”