Signage of the World Bank. Photo/Pool
By Business Daily Africa
The size of Kenya’s debt from the World Bank crossed Ksh1.5 trillion ($9.99 billion) in June on increased disbursements and depreciation of the shilling.
Fresh data published by the Central Bank of Kenya shows Kenya’s outstanding loan to the multilateral lender stood at Ksh1.57 trillion ($10.45 billion) at the end of the previous financial year from Ksh1.46 trillion ($9.72 billion) at the end of May.
The Ksh110.9 billion ($738.35 million) growth in a single month now means close to 60 percent of total owings to multilateral lenders belong to the World Bank.
The sharp growth in external debt has been attributed to new disbursements in the last month of the financial year and also accelerated by a sustained depreciation by the local currency that has shed 17 percent since January.
“The Ksh309.4 billion ($2.1 billion) increase in external loans is attributable to disbursements made during the month and depreciation against major currencies” said Treasury in the release.
The bullish dollar has gained significantly against weaker currencies since the pandemic and accelerated by geo-political tensions that disrupted international trade.
According to the data, 73 percent of the country’s external debt is owed to World Bank, Eurobonds, China and the African Development Bank, giving a combined Ksh3.97 trillion ($26.4 billion).
Increased dependence on these financial partners for infrastructural developments and fiscal support has put the country on a difficult path as it juggles high debt service costs.
The Treasury estimates that the total debt service costs for the current financial year will increase to a record Ksh1.62 trillion ($10.8 billion) with 38 percent of that going to external lenders.
The Ksh1.6 trillion that will be used on debt service represents 64 percent of total ordinary revenue that the Treasury expects to net in the year ending June 2024.
Overall, total debt to external lenders stood at Ksh5.4 trillion ($35.95 billion) in June and had risen to Ksh5.7 trillion ($37.95 billion) at the end of August, representing 54 percent of total public debt.
The high exposure to foreign currency risk will be felt as the country retires the 2024 Eurobond that will drain $2 billion from its reserves, translating to around Ksh300 billion.