Kenya Debt Costs to Rise as Shilling Hits All-Time Low Against the Dollar

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Kenya’s debt service costs, which are expected to surge by 22% this fiscal year, are set to rise even further as the East African economy’s currency sinks to all-time lows against the dollar, Bloomberg News reported. Kenya’s Treasury expects to spend a record 1.17 trillion shillings ($10.4 billion) in the year through June on loan repayments, equivalent to about two-thirds of its revenue, according to the parliament’s budget office. This will be compounded by a 2.6% depreciation by the Kenyan shilling so far this year, after the currency fell to 112.06 per dollar. In the previous fiscal year, Kenya’s debt repayments jumped by about a fifth to 781 billion shillings on account of the local currency’s depreciation, according to Treasury. The shilling plunged 7.4% in the year through December, hurt mainly by the uncertainty wrought by the Covid-19 pandemic. “Recent exchange-rate fluctuations have been more modest,” Tobias Rasmussen, the International Monetary Fund’s resident representative for Kenya, said in an emailed response to questions. “We continue to view that maintaining exchange-rate flexibility helps the economy absorb potential shocks.” Read more.