Kenya is seeking a KSh 40.6 billion debt service suspension for a debt due from 1 January and 30 June 2020 from bilateral creditors outside the Paris Club. In total, Kenya seeks to suspend servicing of due loans worth at least $802 million to the end of June.
Treasury CS Ukur Yattani says the formal approval of the application is expected within a few weeks. This comes after the Paris Club accepted Kenya’s application to suspend KSh 32.9 billion due in the first six months of 2020.
On Monday, the representatives of the informal group of official creditors consisting of Canada, Belgium, Denmark, France, Japan, Italy, South Korea, Spain, US, and Germany assented Kenya’s application, saying it will improve Kenya’s spending in mitigating impacts of COVID-19.
“The Government of the Republic of Kenya is committed to devote the resources freed by this initiative to increase spending in order to mitigate the health, economic and social impact of the COVID19-crisis,” reads a Paris Club Statement.
Yattani says the Paris Club debt service suspension will give Kenya the fiscal space to make necessary expenditures to recover from the COVID-19 pandemic. The Debt Service Suspension gives Kenya a total of five years to repay the loans and a year’s grace period.
Members of the Paris club also said that Kenya is seeking relief from other bilateral creditors, in a bid to improve its debt transparency and management.
“The Government of the Republic of Kenya is also committed to seek from all its other bilateral official creditors a debt service treatment that is in line with the agreed term sheet and its addendum. This initiative will also contribute to help the Republic of Kenya to improve debt transparency and debt management.”
Debt Service Suspension from China?
Kenya is also pursuing debt service suspension from its biggest bilateral lender, China, whose mounting debt is knocking on the door. The country is set to begin paying back a Ksh 162 billion debt for the Nairobi-Naivasha portion of the Standard Gauge railway, following the end of its five year grace period. The first of the 30 semi-annual payment is due on 21 January, while the last is set for 21 July 2035.
The maturity of the second SGR Loan is expected to push repayments to Exim bank from Ksh 71.4 billion in the current fiscal period to Ksh 111.47 billion in the next one. Kenya paid Ksh 31 billion to China’s Exim bank in the year ending June 2019.
Yattani says Treasury is in talks with Beijing to finalize negotiations on the debt service suspension, adding that Cina has generally agreed to the matter.