China Woos Kenya With New Debt Relief Package
Treasury CS Ukur Yattani has shed more light on a new debt relief deal Kenya has been offered by China, approximately one month after the government rejected a Ksh 3 trillion debt relief package.
On Monday, June 8, China announced that it will delay loan repayments for 77 low-income countries as part of the G20 nations debt relief program. G20 is a group of 20 major economies in the world.
The new relief program, whose amount has been unsubstantiated, will aid lesser-developed countries to mitigate negative effects of the Covid-19 pandemic.
Yattani, who spoke with the Standard, on Tuesday, June 9, detailed that Kenya was holding talks with the Asian nation on the new terms under the proposed package.
“The bilateral engagements are still on,” Yattani stated as details of the deal remain scanty.
In the budget proposal 2020/2021, Kenya is set to spend Ksh 904.7 billion on servicing debt. The Parliamentary Budget Office noted that debt repayment will surpass development expenditure by Ksh 356 billion as the money allocated to development is Ksh 584 billion.
While rejecting the Ksh 3 trillion debt relief offered by G2O on Friday, May 15, Yatani argued that the deal limited access to international capital markets for the period of the relief. He added that the terms could derail the country’s ability to finance the deficit later on.
“We fear we might unnecessarily create a crisis,” Yatani stated in an interview with Reuters.
On Wednesday, June 3, while addressing the Organization of the African, Caribbean and Pacific States (OACPS), President Uhuru Kenyatta raised concerns over the rate at which developing countries are amassing debt.
“The debt of many member states continues to rise. Forty-four (44) per cent of low income and least developed countries (LDCs) are in debt distress or assessed as being at high risk of external debt distress,” President Kenyatta highlighted.
As at March 2020, Kenya’s public debt stood at Ksh 6.28 trillion with half of the loans owed to external debt creditors, while a third of it is owed to private creditors including holders of the country’s two Eurobonds.
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