Following the President’s directive to put a stop to incurring external debts, Kenya is making strides in cutting down its debt service.
The Kenyan National Treasury is currently takings steps to swap the country’s short-term debt with longer-term issuances.
Last week the treasury began a debt swap that will see Sh87.8 billion ($714.6 million) worth of short-term debt converted into long-term debt to ease the pressure it is experiencing from maturities. During the same period, the Kenyan government floated its first switch bond since June 2020.
The treasury recently noted that it has no leeway for any fresh borrowing, a problem exasperated by the numerous economic challenges the country is faced with.
Treasury Cabinet Secretary Njuguna Ndung’u noted, “Right now, we don’t have headroom for accumulating debt, so in a sense, we have to go down into liability management. When you are buffeted by multiple shocks, the reaction is often to use your resources or borrow to overcome the crisis.”
The professor also reassured that measures are being put in place to avoid implementing a counter-productive strategy originally intended to reduce the country’s dependency on external loans.
He noted specifically that the targeted Sh300 billion ($2.4 billion) worth of budget cuts initiated by the Ruto administration have been revised to ensure that the move does not deter the growth of the Kenyan economy.
“The budget cuts were necessary to try and shift resources to needy areas. It is austerity measures to try and save lives. We have to look at what is essential and what is not essential. You cannot affect aggregate demand in times of recession and that is why the budget cuts were in areas that are not essential,” Njuguna Ndung’u said.
Even before President Ruto’s inauguration, the then-presidential aspirant made it clear that a key ideal in his manifesto was to cut down the country’s debt and end external borrowing.