Kenya seeks extension of debt service relief from IMF, World Bank

Kenya will be pushing for an extension of the external debt service suspension program when the World Bank and the International Monetary Fund (IMF) meet next week.

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According to notes from the National Treasury from its engagement with the two Bretton Woods Institutions and African Finance Ministers, Kenya is seeking to push the stay of the debt service suspension from June this year to June 2022.

“This action will yield additional external resources, addressing debt vulnerabilities and providing liquidity,” said Treasury Cabinet Secretary Ukur Yatani.

Further, Kenya is seeking for the enhancement of the limits of access to IMF facilities including the strengthening of quick disbursements under IMF’s rapid credit facility (RCF) and rapid financing instrument (RFI).

Moreover, Kenya is set to appeal for the re-profiling of existing debts owed to the World Bank and the IMF.

The set of proposals is set to be tabled at the World Bank/IMF Spring meetings which run between April 5 and April 11.

The pair of the World Bank and the IMF are expected to intercede for the extended relief on behalf of poor and lower-middle income countries to bilateral creditors covered by the Paris Club and G20 countries.

While, the pair has previously interceded for the creation of the debt service suspension initiative (DSSI), none of the two parties have granted relief on outstanding credit facilities.

Tangible gains?

Kenya joined the DSSI program in January this year, missing the first six month’s of the relief program.

According to Treasury data presented to Parliament earlier this month, Kenya has so far saved Ksh.58.1 billion from the DSSI.

This to include Ksh.32.9 billion in suspended interest payments by 10 members of the Paris Club group of creditors and Ksh.27 billion in suspended payments to China.

The National Treasury had been required to ring-fence the savings made from the program to specific programs in the fight against the COVID-19 pandemic according to issued DSSI terms.

Nevertheless, the exchequer has not provided any evidence towards the same course, an indicator that savings made from the program could be lost elsewhere.

For instance, subsequent to the DSSI participation, local debt redemption costs have ticked upwards swallowing up potential savings from the debt standstill pact.

Under the first 2020-21 supplementary budget for instance, local debt service costs to June have jumped by Ksh.45.7 billion.

This represents about 79 per cent of Ksh.58.1 billion in DSSI savings.

Subsequent mini-budgets are also expected to bloat overall spending wiping out savings from any debt relief program booked.

For instance, the supplementary budget signed off by President Uhuru Kenyatta on Tuesday approves Ksh.125.2 billion in extra spending with the entire sum coming from new borrowing.