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IMF modifies Kenya’s external debt distress level to moderate from low

International Monetary Authority

The country’s improving debt risk is mainly attributed to better debt management plan focused on cheaper, long-term local loans

The International Monetary Fund (IMF) in its assessment has modified Kenya’s external debt distress level to moderate from low, attributing it to better debt management plan. The country’s debt management plan currently focuses on cheaper and long-term domestic loans, the media reports said. 

It is reported that the country’s total public debt will reach 63.2 percent of GDP this year. That said, it is expected to slowly decline in the medium term, compared to 58 percent in 2017 and 53.2 percent in 2016. 

For a long time, Kenya has been issuing local currency bonds with over 15 years of maturities. In Africa, Nigeria issued a 30-year bond in April last year. 

IMF in its paper The Evolution of Public Debt Vulnerabilities in Lower-Income Economies has assessed Kenya’s external debt risk at length. According to IMF, the country’s focus on local debt is moving in the right direction to ease repayment. 

IMF said in the policy paper that “The local currency debt to GDP ratios low-income economies like Ghana and Kenya have been increasing at broadly the same pace as the foreign currency debt to GDP ratio, with the share of local currency debt to total public debt at around 30 per cent over the last decade.” 

The paper mentions Kenya, Ghana and Tanzania to have witnessed local investors actively participate in their respective debt markets. Of the African countries, Kenya and Nigeria have imposed restrictions on the security offered. 

In October 2018, the IMF modified Kenya’s external debt distress to moderate from low owing to refinancing risks, a local media reported. 

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