Rising debt distress in developing economies such as Kenya is a major threat to their contribution to global growth, International Monetary Fund now says.
According to the lender’s latest future prospects outlook in preparation for this year’s G20 summit in India, about 15 percent of low-income countries are in debt distress and an additional 45 percent are at high risk of debt distress.
In Kenya, debt servicing has been a pain to the taxpayers who have been hit by a series of tax increments in efforts to reduce foreign debt pressures as well as narrow the government’s fiscal deficit.
Maturity of some of the loans, such as the USD 2.0 billion Eurobond maturing in June 2024, amidst the weakening Kenyan shilling against the dollar has put pressure on the National Treasury to seek additional billions for repayment of mounting foreign debt.
The Kenyan Shilling has continued depreciating consequently against the US dollar, hitting a new low of 126.9 recently posing much pressure on the country’s external debt. It opened the year at 123.4 with the local currency shedding about 2.8 percent of its value to the dollar year-to-date.
It is the second time the reserves are dropping below the statutory levels in less than three months. These can be the reasons that could plunge the country into debt distress as echoed by the World Bank and International Monetary Fund who say Kenya is currently at risk of high debt distress.
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