- Kenya’s recent preference for the concessionary funding option from international financing institutions is likely to improve the country’s credit profile
- Kenya’s debt payment obligations will reduce due to lower interest charges and a longer repayment period
David Rogovic, vice president and senior analyst at Moody’s Investors Service has stated that Kenya’s recent preference for the concessionary funding option from international financing institutions such as the World Bank and bilateral partners is likely to improve the country’s credit profile. If it continues to opt concessional loans instead of commercial debt such as Eurobonds over a longer period, Kenya’s debt payment obligations will reduce due to lower interest charges and a longer repayment period. Of late, Kenya has been relying on commercial debt, largely through Eurobonds, to close the external financing part of the budget deficit.
Concessional loans from the financing institutions or bilateral partners have a slower disbursal process than commercial debt. He added that there is a lower default or rollover risk with these loans. Mr. Roger, however, warned that concessional loans to finance the budget deficit would see the country face more onerous conditions from the lenders demanding policy reforms and stricter spending discipline.
The World Bank disbursed a $1 billion loan to Kenya this week for budgetary support and to support the fight against COVID 19. This is in addition to the Sh75 billion loan for budgetary support last year. Of late, Kenya has been relying on commercial debt, largely through Eurobonds, to close the external financing part of the budget deficit.
