, giving dimension to the impact of a weakening shilling whose exchange rate against the greenback has tanked to a historic low of KSh133.55.){kind=link}
Kenya’s external debt has ballooned by a staggering KSh344.4 billion ($2.58 billion), giving dimension to the impact of a weakening shilling whose exchange rate against the greenback has tanked to a historic low of KSh133.55.
The Central Bank of Kenya (CBK) data shows that total external debt as of January stood at $37.63 billion (KSh4.7 trillion), where the mean exchange rate was 124.4 against the dollar.
This means that at the current exchange rate, the stock of debt has been inflated to KSh5.03 trillion, pushing up the cost of servicing some of Kenya’s foreign loans as they fell due during the review period.
By February, Kenya’s National Treasury paid KSh694 billion ($5.2 billion) for debts, an increase of KSh27 billion ($201 million) in the same period last year, with part of the increase being attributed to the weakening of the Shilling which pushed the cost of servicing foreign loans.
A weak shilling has also pushed up the cost of importing key materials such as fuel, fertiliser and machinery from the global market, a situation that has been reflected in the local economy through a spike in prices of basic commoditie
By February 2022, both local and foreign creditors were paid KSh667 billion ($4.99 billion) from the exchequer, piling pressure on the country’s flagging tax revenues. The situation has been aggravated by the tightening of liquidity in the local and international financial markets, which makes it difficult for the country to borrow and repay some maturing loans, technically known as refinancing.
Kenya’s latest stock of external debt might have reduced on new loans being contracted or repaid.
The World Bank in a new report has cast doubt on the ability of the country and other sub-Saharan nations to refinance their multi-billion Eurobonds in the coming months following difficulties facing the global debt markets that have triggered a new wave of expensive loans.
Kenya is preparing to retire the KSh264 billion ($1.98 billion) debut Eurobond whose maturity comes up in June next year.
The country’s stock of foreign loans must have changed in the intervening period with the nation retiring some debt even as it contracted new ones.
The Kenyan government for example in March paid a total of KSh33 billion ($247 million) for the construction of the standard gauge railway (SGR), according to figures provided to The Business Daily by the country’s Controller of Budget, Dr Margaret Nyakang’o.
These debt repayments have contributed to a record drop in the country’s foreign exchange reserves to KSh860.6 billion ($6.436 billion) by the close of business on Thursday last week.
Almost half of the total public debt is in foreign currencies thus exposing the country to forex volatility.
Source: theeastafrican