Kenya likely to default on debt repayments, IMF warns


President Uhuru Kenyatta signs into law a Bill creating a 15 percent tax relief for Kenyans ...
President Uhuru Kenyatta signs into law a Bill creating a 15 percent tax relief for Kenyans buying houses under the Affordable Housing Scheme. PHOTO/PSCU/FILE

In Summary

  • 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 Washington-based lender forecasts that Kenya’s total public debt will reach 63.2 percent of economic output or GDP this year then begin declining.
  • The IMF recommended Kenya’s Treasury refinance loans at longer maturities to limit refinancing risks.

Kenya’s risk of defaulting on debt repayments has increased to moderate from low, the International Monetary Fund (IMF) said.

IMF cited the government’s public investment drive and revenue shortfalls in recent years.

The Washington-based lender forecasts that Kenya’s total public debt will reach 63.2 percent of economic output or GDP this year then begin declining.

Public debt was 58 percent last year and 53.2 percent in 2016.

“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.

The government led by President Uhuru Kenyatta, began to pour billions into infrastructure projects in 2016, including a Chinese-built railway.

In his second and final term, Kenyatta has said his government will focus on manufacturing and public housing.

The IMF recommended Kenya’s Treasury refinance loans at longer maturities to limit refinancing risks.

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