Kenya: Govt's Foreign Banks Debt Stock Hits U.S.$10 Billion

(file photo).
1 October 2019

Kenya's expensive debt from foreign commercial banks hit Sh1.09 trillion by end of June following the Sh210 billion May Eurobond issue.

The loan type has grown fold over the last four years.

Kenya National Bureau of Statistics (KNBS) balance of payment data sourced from the Treasury shows that in June 2015 Kenya's commercial loans stood at Sh276 billion. They have since grown by 296 percent in the intervening period.

"The stock of public external debt increased by Sh462.9 billion to Sh3.023 trillion as at end of June 2019. Stock of debt from commercial banks increased by 20.9 percent to Sh1.096 trillion as at end of June 2019," KNBS said in the report released on Monday.

In 2013 only seven percent of external debt was commercial, with 27 percent bilateral and 64 percent borrowed from multilateral sources.

But by June last year commercial debt had gone up to 34 percent, while bilateral stood at 31 percent and multilateral 34 percent.

"With the elevation of Kenya into middle income earner status in 2014, external debt composition of multilateral institutions declined from 52.5 percent (June 2014) to 30.3 percent (June 2019). Commercial financing borrowing contribution has edged up to 36.25 per cent (June 2019) from 20.62 per cent (June 2014)," said Genghis Capital analyst Churchill Ogutu.

Commercial loans are expensive to service, hence Kenya has also seen increased amounts paid on interest each year, the bulk going to the three Eurobonds that the country has issued.

Against a preferred debt to service ratio threshold of 30 percent, Kenya hit 35.7 percent in 2017 and was expected to be at 33.4 percent by 2019.

The Treasury has proposed to raise the public debt cap at Sh9 trillion, but is also indicating a shift away from commercial loans part of its policy.

Kenya has borrowed almost 10 syndicated loans since President Mwai Kibaki's 2011 four- year Sh50 billion commercial loan.

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