Kenya spent about Ksh.70 billion to repay its debt, according to the latest records from the Treasury.
The debt repayment has seen Kenya’s foreign exchange reserve dip to 3.9 months of import coverc, down from 4.1 months.
According to the Central Bank of Kenya, the country’s foreign exchange reserves dropped by $487 million (Sh63.9 billion) in the week ending July 19, 2024.
This is after Kenya repaid a significant part of its external debt, bringing down the resources that are critical in supporting the local currency.
The current reserves can Only support 3.9 months of import duty, down from 4.1 months.
The forex fall short of 4.5 months of import cover necessary to sustain the country’s imports.
The forex dipped after Kenya serviced Ksh.70 billion in external debts.
Part of the Ksh.70 billion includes Ksh.56 billion which was channeled to service Chinese built Standard Gauge Railway (SGR).
Also Read: Kenya’s Forex Reserves Drops to Ksh.63 Billion on Debt Repayment
Kenya has the fastest growing economy in Africa and a vibrant business center. But President William Ruto’s government is desperate to stave off default.
The country’s staggering Ksh.10.5 trillion ($80 billion) in domestic and foreign public debt accounts for nearly three-quarters of Kenya’s entire economic output, according to a recent report from the United Nations Conference on Trade and Development.
Interest payments alone are eating up 27 percent of the revenue collected.
President Ruto had promoted Finance Bill 2024 as necessary to avoid defaulting on the country’s debt, but the violent reaction to Parliament’s approval prompted him to abruptly reverse course and reject the legislation he had asked for.
“Listening keenly to the people of Kenya,” he said, “I will not sign the 2024 finance bill, and it shall subsequently be withdrawn.”
Just two weeks before he rescinded the Bill, the International Monetary Fund (IMF) and Kenyan authorities had reached an agreement on a package of comprehensive reforms and tax increases needed to get the country on a more stable financial footing.
The policy review, required when the I.M.F. lends money to distressed nations, warned of a “significant shortfall in tax collection” and a deteriorating fiscal outlook.
I.M.F. lending to the troubled East African nation now totals $3.6 billion.
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