Restructure loans to reduce debt - CBK

Central Bank of Kenya Governor Dr Patrick Njoroge speaking during the launch of inter-agency guidelines on cooperation and collaboration in the investigation and prosecution of Terrorism and financing: [Wilberforce Okwiri, Standard]

President William Ruto's administration must control its debt through refinancing or substituting commercial loans with cheaper options from friendly nations or development financiers as debt levels near the allowed Sh10 trillion limit.

Failure to do this may force Kenya to incur steep hikes in the cost of external borrowing and set it up for debt distress, Central Bank of Kenya (CBK) Governor Patrick Njoroge has said.

"Debt management is something that needs to be taken much more seriously given the narrowing space that we have seen in recent months," Dr Njoroge told Bloomberg TV in an interview on Wednesday.

"See what else we can do on refinancing...whatever...high interest debt with low interest debt, looking more toward concessional debt."

His views come at a time Kenya is enduring record capital outflows and facing higher external borrowing costs.

Rising interest rates in the United States has led to depreciation of the Kenya Shilling, leading to higher costs of servicing dollar-denominated debt.

"Financial markets have frozen us out and it is difficult for us to maintain our relationships in the capital markets," Njoroge said.

"Things would be tougher for a bit longer and that is a big concern for us."

The new government has signalled it will cut back on a borrowing binge adopted by the previous administration, which was marked by Eurobond offerings, a package of Chinese loans and syndicated commercial loans.

This comes as it scrambles for ways to put a lid on the fiscal deficit while reducing the tax burden on Kenyans.

President Ruto has hinted he will go big on social spending to address the runaway cost of living.

But the government is under pressure due to stiff measures set under an International Monetary Fund loan agreement and further faces an economy battered by the Covid-19 pandemic, rising food and fuel prices spurred by the war in Ukraine, the worst drought in four decades and soaring public debt.

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