Kenya is seeking debt-relief options with lenders as the state seeks more money to deal with the negative impacts of the COVID-19 pandemic.
According to Treasury Principal Secretary, Julius Muia, talks are under way with creditors, both bilateral and multilateral, who may opt to delay payments due this year.
“There are some who have given us an indication that they will forgo interest and principal in the calendar year. We are negotiating, but what we are not doing is rescheduling.” Bloomberg cited the PS.
Additionally, the government is also pursuing a proposal from The Actuarial Society of Kenya (TASK) that interest payments on pension assets, 40% of which are Treasury debt, be frozen for a period of two years. In the long run, that would save KSh60 billion a year to be spent on food and income security, and on enhancing medical infrastructure according to the Treasury PS.
Furthermore, TASK proposes that the National Social Security Fund offers the state a “soft loan” of KSh25 billion, with no details on the terms of the loan.
According to data from the Central Bank of Kenya, pension funds hold about 30% of Kenya’s KSh3 trillion domestic debt. As of 2019, pension funds held KSh1.3 trillion worth of assets.
Kenya estimates debt-service costs will increase to KSh904.7 billion in the fiscal year that begins July 1, from 805.2 billion in the current year.
Elsewhere, Rwanda is also seeking the suspension of its debt repayments for at least two years. President Paul Kagame predicts that the economy will probably only grow 3.5% this year, from an earlier projection of at least 8%, and is, therefore, negotiating with lenders to delay repayments and use the money to stimulate economic activity instead.
Officials from the G20 countries (Group of 20 major economies) have already announced plans to suspend both principal repayments and interest payments on loans for the world’s poorest countries. The waiver will last up to the end of the year.
The representatives of the Paris Club Creditors have agreed, together with the government of Somalia, to cancel 67% of the latter’s debt, translating to $1.4 billion.
The UNCTAD (United Nations Conference on Trade and Development) is urging for the writing off of close to $1 trillion debt owed by developing countries across the world. The move seeks to cushion the said countries from the negative impacts of the global COVID-19 pandemic.