26 February 2013

Kenya: Strong Shilling Helps Cut External Debt

THE country's external debts decreased by Sh2.6 billion in December due to a stronger shilling against the Japanese Yen. Data from the Treasury shows that external debt stood at Sh821.97 billion in December 2012 compared to Sh824.59 billion in November.

This was however above the Sh800 billion set ceiling approved for external debt even though this floor was later raised to Sh1.2 trillion by Parliament in January.

On a month that the country's public debt position almost climbed to Sh1.8 trillion, domestic debt increased by Sh12.83 billion to stand at Sh971.27 billion.

For the month, public and publicly guaranteed debt stood at Sh1,793.24 billion or 46.38 per cent of GDP. This was a 0.6 per cent jump over the end November 2012 position attributable to increase in domestic debt.

Of the total borrowings, 54.2 per cent is domestic debt while 45.8 per cent is external loans. During the month, the Kenya shilling depreciated against the US dollar, Sterling Pound and the Euro by 0.12 per cent, 0.87 per cent and 1.75 per cent respectively while it appreciated against the Japanese Yen by 4.15 per cent.

About 32 per cent of Kenya's external debt is denominated in the US Dollar while about 6 per cent of the external loan is denominated in Yuan .

"The depreciation of the Kenya shilling has the effect of increasing external debt stock and the cost of debt service, the December debt bulletin says.

Japan, France and Germany are the leading creditors to Kenya in the bilateral category. Bilateral debt stands at Sh265.42 billion (32.29 per cent of the total), which includes Sh41.00 billion guaranteed debt.

In the multilateral category institutions such the African Development Bank, Internatioanal Monetary Fund and European Invesment Bank account for the largest proportion of external credit totaling Sh482.71 billion.

Commercial debts from banks constitutes 7.10 per cent of the total public and publicly guaranteed external debt as at end of December.

"Energy and Infrastructure sector has been receiving the biggest share of the external loan funding receiving more than 36 per cent of the total while the health sector received the lowest share of 5.4 per cent," Treasury says.

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