Recently, the International Monetary Fund (IMF) stated that Kenya may lose access to cheap Eurobonds due to its increasing debts. By implication, Kenya is likely to lose its chances of issuing external bonds for the generation of foreign currency.
According to a report, the IMF cited investor concerns over possible defaults or repayment deferment. This comes after a recent Debt Sustainability Assessment (DSA) of Kenya’s economy by the IMF revealed it was likely to breach the threshold (external borrowing limits) over the next decade.
The IMF revealed in its assessment that “Kenya is susceptible to export and market financing shocks and more prolonged and protracted shocks to the economy would also present downside risks to the debt outlook, including from the continued potential loss of market access for frontier economies at reasonable prices, thus raising the probability that the debt indicators would remain in breach of the thresholds over time.”
In a report by Fitch Ratings, Ukur Yatani, Kenya’s National Treasury Cabinet Secretary, said that the government is seeking an IMF programme of $2.3 billion. Kenya expected that a readjustment of fiscal policies to reduce budget deficits would form an important element of such an agreement. However, Fitch Ratings revealed that even if the country signs a deal with the IMF, implementation of the fiscal adjustments necessary to stabilize debt levels may prove difficult given challenging political circumstances.
As of August 2020, Kenya’s debt stood at 69.2 percent of the GDP, having climbed from 61.7 percent at the end of 2019 and 50.2 percent at the end of 2015.