Kenya is making progress in reducing its debt servicing after the President issued an order to halt accruing external debts.
The Kenyan National Treasury is actively moving to replace the short-term debt issuances of the nation with longer-term ones.
To relieve the strain from maturities, the Treasury started a debt exchange last week that will convert Sh87.8 billion ($714.6 million) in short-term debt into long-term debt. The Kenyan government issued its first switch bond since June 2020 around the same time frame.
The treasury recently emphasized that it has no room for any additional borrowing, a dilemma made worse by the various economic difficulties the nation is currently experiencing.
“Right now, we don’t have headroom for increasing debt, so in a way, we have to go down into liability management,” Treasury Cabinet Secretary Njuguna Ndung’u said. The common response when faced with multiple shocks is to use your resources or borrow money to get through the crisis.
The professor also offered assurances that precautions are being taken to prevent adopting a misguided plan that was initially intended to lessen the nation’s reliance on foreign loans.
He especially mentioned that the Ruto administration’s planned Sh300 billion ($2.4 billion) in budget cuts has been altered to ensure that the action would not impede the expansion of the Kenyan economy.
“To try and redirect resources to needed areas, budget cuts were required. Austerity measures are being taken to try to save lives. We must consider what is necessary and what is not. Budget cuts were made in non-essential areas because you cannot change aggregate demand during a recession, according to Njuguna Ndung’u.
Before President Ruto took office, he made it clear that reducing the nation’s debt and ceasing external borrowing was a top priority in his platform.