EconomyThe Kenya Shilling Weakens as its External Debt Repayment Burden Weighs in

Kenya's new currency notes held by the CBK Governor Dr. Patrick Njoroge.

Kenya’s debt service costs, which are expected to surge by 22% this fiscal year, are set to rise even further as the Kenya Shilling sank to all-time lows of Kes 112.100 against the US Dollar, reports by Bloomberg Africa indicate.

The latest Central Bank of Kenya (CBK) weekly bulletin shows that the Kenya Shilling exchanged at Kes 111.77 per US dollar on November 11, compared to Kes 111.44 per US dollar on November 4, 2021.

On 21st October, the local unit was exchanging at Kes 111.21 against the greenback. This compares to CBK key indicative exchange rate of  Kenya shilling 111.97 when the forex markets opened yesterday and 112.01 today- an all-time new low

Kenya’s official foreign exchange reserves have also been depleting from US$ 9,261 Million on 14th October 2021 or 5.66 months of import cover to US$ 9,094 Million equivalent to 5.56 months of import cover. Figures from National Treasury and CBK shows that Kenya’s public debt has been on a rise from Kes 6.7 Trillion in June 2020 to Kes 7.7 Trillion in June 2021.

Domestic Debt has also risen significantly as the Government increases its borrowing requirements from the money market, from Kes 3.2 Trillion in June 2020 to Kes 3.7 Trillion in June 2021.

External Debt has also increased sharply from Kes 3.1 Trillion in June 2020 to Kes 4 Trillion at the end of June 2021. At the end of November 5th 2021, Banking Institutions held the largest portfolio of Kenya’s domestic debt, at 50.27%, followed by insurance companies(6.69%), Parastatals(5.37%), Pension Funds(31.52%) and Others( 6.14%).

Debt stock of 7.1 trillion Kenya Shillings

Kenya’s overall public debt increased from 48.6% of GDP at the end of 2015 to an estimated 69% of GDP at the end of 2020. As of September 2020, Kenya’s external public debt was 51.4% of its total debt stock of 7.1 trillion Kenya Shillings.

According to a presentation made to the Senate Committee on Budget and Finance by CBK, in September this year, Kenya’s total public debt to GDP ratio has risen significantly from a low of 40% in June 2012 to 69% in June 2021. This is above the 50% threshold that has been recommended by the International Monetary Fund (IMF). CBK points to huge spending on infrastructure in recent years and more recently, COVID-19 related spending for Kenya’s bulging public debt burden.

In March 2021, the IMF assessed Kenya’s public and publicly guaranteed debt as sustainable but with a high risk of debt distress.

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