Kenya’s Creditors Snub Second Phase of Debt-Service Initiative
(Bloomberg) -- Kenya expects to only secure about a quarter of the debt relief the government targeted to get in the second phase of the Group of 20 nations’ so-called Debt Service Suspension Initiative after some creditors declined to participate.
Relief to East Africa’s biggest economy is seen at $89 million in the second half of this year under the DSSI, lower than an initially projected $379 million, Treasury Secretary Ukur Yatani said in a letter to the International Monetary Fund.
Kenya received debt suspension of $425 million in the first half, according to the report on the IMF website. Deferred loan payments “helped reduce financing pressures, though yielding less than originally expected,” Yatani said.
Earlier this month, the IMF warned of “economic collapse” in some low-income countries should creditors in the world’s richest nations fail to suspend debt-service obligations and help renegotiate new terms. The DSSI expires at the end of 2021 and interest rates are poised to rise, which will make it increasing difficult for low-income countries to service their debts, it warned.
The government plans to issue a Eurobond by the end of December to finance the budget for the fiscal year through June, if conditions are favorable, according to the IMF report. Another Eurobond will be issued by the end of June 2022, and the proceeds will be used to redeem part or all of a similar bond maturing in 2024.
The Treasury has suspended repayment of 305.4 million euro ($345 million) syndicated loans claimed by a group of Italian commercial banks that was used to fund three dam projects -- Arror, Kimwarer, and Itare -- because they are “disputed and subject to on-going arbitration/court proceeding,” according to the letter. The loans form part of the public debt stock, but will only be included in the debt-service schedule when the matter is settled, it said.
The government also plans to replace its current 9-trillion-shilling debt ceiling with a new framework by June 2022. The new plan will anchor debt at 55% of gross domestic product in present-value terms.
The new framework will have an “accountability requirement that mandates transparent communication to parliament and the public on plans and progress toward achieving the debt anchor within a specific time-frame,” Yatani said.
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