Kenya government says debt remains sustainable despite IMF warning

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[Photo courtesy: AP]
Kenya’s debt is still manageable, the country’s Cabinet Secretary National Treasury and Planning Henry Rotich said on Sunday.

Rotich’s remarks came after the International Monetary Fund raised its assessment of the East African country’s risk of debt distress to moderate.

According to CS Rotich, Kenya’s nominal debt-to-gross domestic product is still sustainable at 55 percent, far lower than the IMF’s upper threshold of 74 percent, while the net value of the debt is less than half of GDP.

The analysis by IMF shows Kenya’s debt is sustainable, although the risk of distress “has moved from low to moderate” in exceptional circumstances, Bloomberg quotes CS Rotich from the capital, Nairobi. “But this is based on extreme shocks, like if growth falls to almost zero, if the country faces high interest rates or a sharp depreciation of the currency.”

“These are the conditions under which the debt can move to moderate risk,” he said. “But Kenya is not a high-risk country.”

Over the past six years, Kenya’s debt has more than doubled to 5.15 trillion Shillings ($50.2 billion), drawing the attention of experts.

Rotich attributed the rise in debt to infrastructure projects by the government. To address that, he said the government was addressing the issue, and was targeting a fiscal deficit of 3 percent by 2022. The deficit peaked at 8.9 percent in the 2016-17 financial year.

”We have continuously implemented fiscal consolidation and plan to access private sector resources through public private partnerships to fund infrastructure development going forward,” he said.