Treasury CS Ukur Yatani during a past press conference in Nairobi. [File, Standard]
Kenya is still negotiating for a debt relief deal with China, Treasury Cabinet Secretary Ukur Yatani has said.
Speaking to The Standard on phone yesterday, CS Yatani said Nairobi has opted for bilateral talks with Beijing.
“The bilateral engagements are still on,” Yatani told The Standard.
Kenya, which owes China Sh725 billion in bilateral debt as at end of last year, had earlier declined to participate in a similar Group of 20 nations (G-20) led debt relief initiative, saying the terms were too restrictive.
On Monday, the Chinese government announced that it had agreed to delay loan repayments for 77 low-income countries as part of the G20 nations’ debt relief programmme.
The temporary relief to poor nations was meant to enable them to weather the Covid-19 pandemic, with the moratorium starting May 1. No details have been provided on the terms of the debt relief that China would offer to the 77 countries.
Mr Yatani had raised concerns that the terms of the G20 deal limited countries’ access to international capital markets and could hinder Kenya’s ability to finance its deficit later in the year. Kenya could have saved about Sh71 billion from the debt service suspension by the G20.
Over Sh1 trillion is in bilateral debt and Yatani had earlier said Kenya was instead engaging creditor countries including Germany, Sweden, Japan, China and France individually to secure moratoriums on debt service payments lasting around a year.
Kenya’s public debt stood at Sh6.28 trillion as at March 2020 with almost half of it owed to external debt creditors. The country is set to spend Sh904.7 billion on public debt servicing expenses in the new financial year.
In its review of the coming budget, the Parliamentary Budget Office (BPO) pointed out that debt repayment had outstripped development expenditure, which is projected to stand at Sh584 billion next year.
Amid the Covid-19 pandemic, Kenya’s budget deficit for the next financial year stands at Sh823 billion.
Treasury expected to borrow Sh349.7 billion externally and Sh486.2 billion from the domestic market. This is expected to significantly push up the country’s national debt.
PBO recommended that Treasury temporarily abandons contracting new expensive commercial loans and as well hold discussions for debt restructuring deals with Kenya’s external creditors.
“A major decline in external receipts, remittances and exports will dangerously expose the country to external debt repayment challenges,” said PBO.
The G20 debt relief initiative only covers official bilateral debt, though it calls for the voluntary participation of private lenders on comparable terms.