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Rich countries reject Kenya’s push for Sh32.8bn debt relief

President Uhuru Kenyatta and Chinese President Xi Jinping at the Hanque Square, Beijing, China. PHOTO | COURTESY

Rich countries, including China, rejected Kenya’s bid to extend the Sh32.8 billion debt repayment holiday to December.

The Treasury told the International Monetary Fund (IMF) that Kenya applied for suspending payment of Sh42.8 billion loans between July and December but only received relief of Sh10 billion.

The government had received debt relief of Sh45.5 billion between January-June when it made the request for the extension from the Paris Club — which includes Belgium, Canada, Denmark, France Germany, Italy, Japan, Republic of Korea, Spain, the US and China.

Some countries like China, which participated in the initial round, snubbed the second round of the Debt Service Suspension Initiative framework.

The Treasury has not disclosed other countries that refused the extension. However, China, which was paid Sh29.86 billion in the quarter to September 2021 made up the biggest chunk of the declined relief.

“During the second phase (July-December2021), the Government of Kenya made a request to all its bilateral creditors for debt service suspension estimated at Sh42.8 billion ($379 million). However, this amount is now projected to be lower at around Sh10 billion ($89 million) due to non-participation by some creditors,” the Treasury said in the IMF Article IV disclosures.

Kenya asked for an extension of the debt repayment moratorium from bilateral lenders, including China, by another six months to December 2021, saving it from committing billions to bilateral lenders.

The Debt Service Suspension Initiative terms rescheduled payments of principal and interest due between January-June to the next four years with a one-year grace period.

Bilateral creditors

The Treasury report shows repayment to other major bilateral creditors has remained low, signalling a temporary freeze.

For example, Kenya repaid France Sh6.61 million in the July-September period compared with Sh2.25 billion a year ago and Sh0.72 million to Japan against Sh454.16 million previously.

Kenya faced a deteriorating cash-flow situation, marked by falling revenues, worsening debt service obligations, and the effects of the Covid-19 pandemic.

It spent Sh99.73 billion less than the cash it had budgeted for servicing external debt for the year ended June 2021, partly on the back of the six-month debt relief.

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