Policy Note - Public Debt Dynamics in Kenya

Prior to Covid-19, Kenya was already on a high public debt trajectory. Covid-19 and its related shocks have only compounded the debt situation in the country. Consequently, the sustainability of the country’s public debt remains a major concern of not only the Kenyan authorities, but also among the populace, financial institutions, and other key stakeholders. Other than the consistent increase in the debt stock, debt-to-GDP ratio and the cost of debt service, concerns are also ripe on the progressive shift of the debt portfolio in favour of expensive commercial loans and the bilateral loans (majority of which is held by China – about 70 per cent) observed in the recent years. In May 2020, IMF downgraded the country’s risk of external debt distress from moderate to high on the account of elevated vulnerabilities instigated by the Covid-19 crisis. Kenya’s the debt-carrying capacity was also downgraded by the IMF from strong to medium in April 2021.

Source : AFDB

Leave a Reply

Your email address will not be published. Required fields are marked *