World Bank urges Government to rebalance its debt obligations

October 11, 2018 (1 week ago)
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The Government also has the option of developing and deepening the local bond market, including initiatives to attract foreign investors to the local currency bond market./FILE

NAIROBI, Kenya, Oct 11 – The World Bank has urged the Government to manage its debt by re-balancing the mix of expensive and shorter maturity commercial loans.

According to the Bank’s latest Economic Update on the country, managing debt could be done by taking advantage of concessional debt, which is more affordable and with longer maturity profiles.

The Government also has the option of developing and deepening the local bond market, including initiatives to attract foreign investors to the local currency bond market.

As of June 2018, the total debt stock had risen to Sh5 trillion from Sh4.9 trillion while the ratio between external and domestic debt is 51 to 49 respectively.

In June 2018, external debt was 28.9 percent of the country’s GDP. It was also 1 percentage point lower compared to June 2017.

But domestic debt increased by 0.4 percentage points to reach 28 percent in June 2018.

The share of multilateral debt to total external debt declined by 5 percentage points to 32 percent in June this year compared to June 2017, while bilateral debt’s share contracted by 2.3 percentage point to 30.2 percent in June 2018.

Kenya attracts far fewer foreign investors into its local currency bond market relative to Nigeria, Egypt, Ghana and South Africa, even though its local currency bond market has grown very rapidly.

“Developing the local currency bond market could spur significant interest from foreign investors and potentially reduce Kenya’s borrowing costs and extend the maturity profiles of local currency bonds.

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