Kenya

The International Monetary Fund approved a $2.34 billion financing package for Kenya to support the country’s Covid-19 response and address an urgent need to reduce debt vulnerabilities, Bloomberg News reported. Approval of the so-called Extended Credit Facility and Extended Fund Facility will enable immediate disbursement of about $307.5 million for budget support in the East African nation, the Washington-based lender said Saturday in an emailed statement. “Kenya was hit hard at the onset by the Covid-19 pandemic,” the IMF said.
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Former Labour Cabinet Secretary Kazungu Kambi has suffered a huge blow after a court declined to rule out a bankruptcy case facing him for failing to pay a Ksh 390 million loan, Kenyans.co.ke reported. Kambi had filed a petition asking for more time to service the loan owed to a local bank arguing that his appointment to the National Lands Commission (NLC) meant that he had a source of income and would afford to clear the debt in monthly installments. Reports indicate that Kambi's net worth is Ksh 50 million.

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Kenya plans to raise more money from foreign than domestic loans as it takes advantage of global appetite for high-yielding debt, Bloomberg News reported. The East African nation intends to raise 123.8 billion shillings ($1.13 billion) from sovereign bonds sold to foreigners in the next four months and an additional 124.3 billion shillings during the fiscal year starting in July, according to the National Treasury. The funds will help finance the budget.

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Kenya’s economy is expected to expand this year as activity resumes following Covid-19 lockdowns, boosting tax revenue and government spending, Bloomberg News reported. East Africa’s largest economy will probably expand 6.4% this year and growth will slow to 5.5% in 2022, with scheduled elections likely to dampen activity, Treasury said in a report on its website. The Treasury estimates that gross domestic product increased 0.6% in 2020, which would make it one of few countries in the region that did not record a full-year contraction amid the coronavirus pandemic.

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China postponed Kenyan debt repayments due over the next six months, a week after the Paris Club of creditors offered the East African nation similar relief, Bloomberg News reported. Kenya had been scheduled to pay 27 billion shillings ($245 million) to China from January through June, Treasury Secretary Ukur Yatani said Wednesday on Spice FM radio in the capital, Nairobi. The delayed payments were agreed after talks with the Chinese government, he said.

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China is in talks with Kenya on a debt-service suspension deal, its embassy in Nairobi said, days after the Paris Club agreed to delay $300 million in payments by the East African nation, Bloomberg News reported. China signed payment suspension agreements with 12 African countries and gave waivers on mature interest-free loans for 15 African nations under the G-20 framework, the embassy said in an emailed statement, without providing details.

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COVID-19 has exposed Kenya’s debt vulnerabilities though official measures including monetary policy easing have helped shield the economy from the impact of the pandemic, the International Monetary Fund (IMF) said late on Friday, Reuters reported. The Fund said it hoped a deal on a new lending facility for Kenya could be presented to its board in early 2021, noting that economic activity in the East African country was starting to pick up despite a drag from sectors such as tourism.

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End Borrowing Binge to Avoid Debt Default

Kenya has a 35 per cent chance of defaulting on its sovereign debt in the next five years, according to a Financial Times survey, The Star reported. The most likely defaulter is Argentina with a probability of 55 per cent but Zambia has just defaulted on its sovereign debt. Debt restructuring is a possibility but lenders like China may reject it and  seize securities like Mombasa port. Even if that is avoided, Kenya will still pay more for its international borrowing because lenders perceive greater risk.

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Kenya is holding talks with the International Monetary Fund on a new lending facility as the East African nation faces huge budget deficits worsened by the coronavirus crisis. The government has abandoned expensive commercial debt to cut back on ballooning repayments at a time when its revenue collection has been squeezed by the pandemic, Reuters reported. Tobias Rasmussen, the IMF’s resident representative in Nairobi, told Reuters on Tuesday that the new facility was being discussed following a Kenyan request that preceded the pandemic.

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Kenya should renegotiate the terms of a loan borrowed from China to build a modern railway line, parliament’s transport committee said in a report, one of many African countries grappling with a pandemic-induced downturn and heavy debt, Reuters reported. The East African nation raised its public debt ceiling last year. It took a loan from China to build the $3.2 billion standard gauge railway (SGR), which started operations in 2017.

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