Kenya Must Curb Borrowing To Keep Debt Affordable, IMF Says

At the rate Kenya is borrowing to fund its spending, the East African nation could accumulate more debt than it can afford to repay comfortably, according to the International Monetary Fund.

While the nation’s current debt stock is sustainable at 49.8 percent of gross domestic product, the Treasury has at times struggled with cash management because of maturities coming in very close together, Armando Morales, the IMF’s resident representative in Kenya, said during a lecture on the country’s debt.

While Kenya has been able to borrow at concessional rates of about 1.6 percent and commercial rates of as low as 4 percent, the international markets will start demanding higher returns at some point, Morales said. The yield on Kenyan Eurobonds maturing in 2024 was 7.37 percent by 6:28 p.m. in Nairobi.

The government plans 462 billion shillings ($4.57 billion) of net external borrowing in the fiscal year through June 2017 and another 225.3 billion shillings from the domestic market to plug its spending shortfall, Treasury Secretary Henry Rotich said in his annual budget speech in June. Read more on this.