Kenya should urgently re-finance its debt in the international markets with lenders that give low-interest rate offers, investment and financial analysts have advised.
A survey conducted by the Institute of Certified Investment and Financial Analysts (ICIFA) noted that the refinancing, among other proposals, would cushion Kenya from the spike in interest rates globally owing to negative impacts of the coronavirus pandemic.
The survey, which contains proposals for Kenya’s economic recovery plan post the Covid-19 crisis, recommends fiscal consolidation at national and county government levels to reduce deficits and debt accumulation in the short term.
“In so doing, the government could consider engaging fiscal consolidations to mitigate the risks of the pandemic, failure to which it could cause a rise in the cost of borrowing for the State and undermining macroeconomic stability with widespread economic costs,” said the survey that polled 93 of its members in both the public and private sectors.
Other short-term measures proposed by ICIFA include restructuring of the government debt, slashing of the Central Bank lending rate and price controls to curb inflation owing to reduced supply. Others are good governance and adequate use of resources.
“Given the size of the country’s public debt, it should be unlikely that the whole burden should fall on taxation. The debt restructuring will depend on government’s ability to cut or at least contain current spending,” said the ICIFA Chief Executive Diana Muriu.
Economic stimulus
Medium-term measures proposed included financial support to micro, small and medium enterprises to ensure that they have easy access to lending facilities at low-interest rates. This will boost their working capital.
Others will encompass an economic stimulus to kick-start growth after the recession, supplying the labour force of low income with food and essential supplies.
For the long-term, ICIFA proposes high investment allocation in the manufacturing sector to build local production capacity and eventually reduce the over-reliance on imports at a time of crisis.
The proposals come in light of President Uhuru Kenyatta’s measures to jump-start the economy, including tax breaks, to lessen the pain for Kenyans caused by economic disruption of the coronavirus.
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