Kenya to defer 75 billion shillings after reversal of G20 debt relief plan
- Treasury Secretary Ukur Yatani said Nairobi had received clarification on the impact of the debt relief program on the country’s credit rating.
- Kenya rejected the G20 initiative in May, saying the terms of the deal were too restrictive.
- Kenya faces a huge budget deficit as the infectious virus has dampened tax revenue growth due to a slowdown in economic activities.
Kenya is now ready to defer 75.5 billion shillings ($ 690 million) in debt repayments to help it overcome the Covid-19 pandemic, marking a turnaround on the country’s debt relief initiative. G20 against the coronavirus he snubbed in May.
Treasury Secretary Ukur Yatani said Nairobi had received clarification on the impact the debt relief program could have on the country’s credit rating and that a final decision will be made as early as next week. .
“We have been reluctant in the past because of the unintended consequences for those who hold private debt,” Yatani told Reuters news agency.
“But now, having gained some assurance that this is an issue that can be managed, we are now seriously considering joining the arrangement.”
Kenya rejected the G20 initiative in May, saying the terms of the deal were too restrictive and also worried about the impact debt relief could have on the country’s credit rating. Kenya.
Nairobi, for example, feared that the terms of the deal limiting countries’ access to international capital markets during the status quo could hamper Kenya’s ability to finance its deficit later in the year.
Instead, the Treasury chose to engage individual creditors, including Germany, Sweden, Japan, China and France, to obtain debt service moratoriums of about a year.
The change of mind comes at a time when a resurgence in the number of Covid-19 infections and deaths has cast doubt on the turning point of the health crisis which has turned into a deep financial crisis.
Kenya had 72,686 confirmed cases on Wednesday compared to 44,881 on October 18, reflecting 62% growth in 30 days. The number of deaths rose to 1,313 from 832 a month ago, a jump of 57.8%.
Local health officials have warned of the second wave of the pandemic that could usher in strict control measures such as lockdowns similar to what is happening in Europe.
The G20 Debt Service Suspension Initiative (DSSI) is important to Kenya at a time when debt servicing costs eat away a significant chunk of its revenue and tax collections come under pressure from the declining business income, layoffs and job cuts.
Kenya’s public debt hit 7.12 trillion shillings in September, an increase of 1.157 billion shillings since September of last year, of which 835 billion shillings, or 72% of that amount, during the period. Covid-19.
In April, the G20 agreed to suspend bilateral debt payment obligations owed by its least developed counterparts until the end of the year under pressure from global organizations.
Yatani said that accepting the arrangement will also help Kenya secure future funding from the International Monetary Fund and the World Bank.
“They are trying to introduce this as one of the essential preconditions for accessing IMF and World Bank resources,” Yatani said. Reuters.
Kenya faces a huge budget deficit as the infectious virus has dampened tax revenue growth due to a slowdown in economic activities.
The budget deficit reached 8.2% of GDP in the fiscal year ended in June, against an initial forecast of less than 7% due to reduced tax collection and lost revenue on tax cuts. taxes granted to individuals and businesses from April.