- In a bold admission of Kenya’s struggle to repay the mounting public debt, the Treasury has recently released a paper titled ‘Post Covid-19 Economic Recovery Strategy 2020-2022’.
- The Treasury, is now seeking to have part of the country’s Sh3.6 trillion foreign debt cancelled that will help Kenya cut billions in monthly interest payments to foreign donors.
In a bold admission of Kenya’s struggle to repay the mounting public debt, the Treasury has recently released a paper titled ‘Post Covid-19 Economic Recovery Strategy 2020-2022’.
The Paper has revealed that it proposes to initiate talks with donor countries and multilateral lenders like the World Bank for writing off its debt. It is also an indication of the gravity of the country’s rapidly deteriorating cash-flow situation with falling revenues and worsening debt service obligations. The tax collection of the Treasury witnessed a drastic fall due to reduced economic activity caused by coronavirus pandemic. The Treasury, is now seeking to have part of the country’s Sh3.6 trillion foreign debt cancelled that will help Kenya cut billions in monthly interest payments to foreign donors. It will also provide offer a breather for more borrowing as it races to breach the Sh9 trillion debt ceiling. Kenya proposes to defer around $690 million (Sh75 billion) in debt payments and seek additional funding from the IMF and the World Bank for budget support to weather the coronavirus economic hardships.
The IMF and the World Bank initiated the debt forgiveness under Highly Indebted Poor Countries (HIPC) in the 1990s to help fight poverty and avoid defaults. Since 1996, debts worth $76.2 billion (Sh8.3 trillion) were cancelled.
Under President Uhuru Kenyatta since 2013, government borrowing rose. Kenya’s public debt as a percentage of GDP rose to 69 percent from 42 percent under President Kenyatta. .. Faced with revenue shortfalls amid the coronavirus-related disruptions and the push to complete projects ahead of Mr Kenyatta’s exit, the Treasury is expected to accelerate borrowing over the next two years.
