Kenya

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.

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.

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.

Kenya Airways Plc needs at least $500 million to ride out the coronavirus crisis after first-half revenue plunged almost 50%, Chief Executive Officer Allan Kilavuka said in an interview, Bloomberg News reported. The carrier, which is 49% state owned, must also be fully nationalized alongside Kenya Airports Authority, which runs the Nairobi hub, under a holding structure similar to that of regional leader Ethiopian Airlines Group, he said. “If we don’t restructure the airline, and take the airline as is into this organization, then we are doing a disservice to the taxpayer,” Kilavuka said.

Kenya’s budget deficit for this financial year could increase due to revenue shortfalls and coronavirus-related disruptions, the finance minister said on Tuesday, Reuters reported. Ukur Yatani, who set the deficit at 7.5% of GDP when he presented the budget in June, did not say how far the gap was likely to expand, adding that they were developing a plan to cover it. “It might be just cutting on some expenditures, particularly the slow-moving projects, and… some state agencies are doing well so we are likely to get some substantial dividends,” Yatani told Reuters.

Kenya’s two biggest banks are probably over the worst as far as potential loan losses go, but may still struggle to boost revenue in the wake of the coronavirus pandemic, according to AIB-AXYS Africa, Bloomberg News reported. Equity Group Holdings Plc increased first-half provisions eightfold, while KCB Group Plc’s rose almost four times from a year earlier, hurting earnings. The nation’s lenders are helping customers restructure their debt after the Covid-19 outbreak stalled economic output and shut schools.

Kenya’s second-biggest bank said loans issued via mobile phones almost halved in the first six months of the year, indicating that the fallout from the coronavirus pandemic is hitting lower-income earners hardest, Bloomberg News reported. Monthly disbursements by KCB Group Plc averaged 4 billion shillings ($36.9 million) to 5 billion shillings, down from 7 billion shillings to 8 billion shillings before the outbreak, and defaults have more than tripled, according to Chief Executive Officer Joshua Oigara. Many of the bank’s mobile loan customers are from the informal sector.

There is no recovery in sight yet for Africa’s worst-performing stock market as investors look to bank earnings this month to assess how hard the coronavirus pandemic hit Kenyan lenders, Bloomberg News reported. Net foreign-investor outflows and reduced dollar earnings led the Nairobi Securities Exchange 20 Share Index to slide for seven consecutive months through July, falling to the lowest in 17 years, according to data compiled by Bloomberg.

Kenya’s banks are likely to issue fewer loans this year and boost investments in government debt to safeguard earnings under threat from the fallout of the coronavirus, Bloomberg News reported. That’s the assessment of some analysts after the East African nation’s lenders released first-quarter results that showed lower profit, a surge in loan-loss provisions and a wave of debt restructurings.

Kenya urgently needs to establish a credit-guarantee program to reduce the risk of lending to small- and mid-sized companies battered by the coronavirus pandemic, according to central bank Governor Patrick Njoroge, Bloomberg News reported. Three in four small businesses in the East African economy only have cash to cover two months of requirements, Njoroge said, citing an April survey.