Due to significant short-term debt obligations and predicted income collection that is expected to increase by 34% in 2023–2024 from the current level of Sh930.35 billion to Sh1.25 trillion, Kenya is pressing for debt forgiveness.
On the eve of the Spring Meetings, members of the Parliamentary Public Debt and Privatization Committee and their counterparts from Finance and Planning met with representatives from the World Bank and the International Monetary Fund (IMF) to start discussions about debt forgiveness.
Kuria Kimani, the chairman of the parliamentary finance and national planning committee, acknowledged the need for immediate assistance as the nation is in debt difficulty while speaking to a local television station.
We are in debt difficulties, which is not a secret. We support some of the IMF and World Bank’s initiatives for budgetary responsibility. But those are long-term solutions. To avoid a default, we require quick action,” Kuria added.
He claimed that the state is having trouble even paying its employees, stressing the urgency of taking quick action to end the problem. The overall public debt of the nation is currently Sh9.2 trillion. The debt servicing is expected to grow by 34% in 2023–2024 from the present Sh930.35 billion to Sh1.25 trillion.n.
The 10-year sovereign bond’s issuance in 2014 signaled the Jubilee administration’s shift to using commercial debt to finance the budget, and Kenya is expected to make the lump sum payment to retire it.
At interest rates of 6.78 percent and 5.87 percent, respectively, the nation borrowed $2.75 billion (Sh346 billion at yesterday’s exchange rate) in two tranches that included a 10-year paper and a five-year issuance ($750 million). The revenues of another $2.1 billion Eurobond issued in May 2019 were used in part to repay the five-year paper.
When a borrower’s outstanding balance on a loan or credit account is partially or entirely forgiven by the lender, this is known as debt forgiveness. The borrower normally needs to be eligible for a particular program before the creditor will forgive all or part of the debt owing.
Debt forgiveness is not a get-out-of-jail-free card, despite the fact that it may seem like the perfect debt solution.The country’s debt fragility makes it unsuitable for lenders, and it wants its request to be addressed at the G20 summit. Fitch Ratings lowered Kenya’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from ‘B+’ to ‘B’ in December of last year. The future looks promising.