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Kenyan banks cut lending to govt by 40%

Published

2 years ago

May 1, 2023

The state of public debt in Kenya has forced commercial banks in the country to make a decision to reduce lending to the Treasury by 40 percent, that is $964 million.

There are concerns that the government’s debt sustainability position and the rising interest rates could leave lenders with worthless papers.

According to Kenya’s Central Bank (CBK), lenders put only Ksh196.2 billion ($1.44 billion) in treasury bills and bonds last year compared with Ksh326.4 billion ($2.4 billion) in 2021.

“Quarterly growth in domestic credit extended by the banking system (to the government) moderated slightly to 1.8 percent in the fourth quarter (October-December) of 2022 from three percent in the previous quarter (July-September), largely reflecting reduced net lending to government,” says CBK.

Kenya has insisted that it would not default on its debt repayment obligations despite delayed payment of civil service salaries.

The head of the International Monetary Fund’s Africa Department, Abebe Aemro Selassie recently revealed that Kenya was not expected to seek a restructuring of its debt despite current strains and a looming bond payment.

Kenya in April revealed plans to issue a new Eurobond to manage 2024’s maturity of a Ksh270 billion ($2 billion) 10-year bond.

Related Topics:debt burden Featured Kenya

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IMF mission concludes 4th loan program assessment in Egypt

Published

8 hours ago

November 22, 2024

Ifeoluwa Dada

Following the completion of a recent visit to Egypt, the International Monetary Fund (IMF) has announced that its mission had achieved significant strides in policy talks aimed at concluding the fourth review of the IMF loan program.

The review is the fourth in Egypt’s most recent 46-month IMF loan program, which was authorised in 2022 and increased to $8 billion this year following an economic crisis characterised by high inflation and chronic foreign exchange shortages. It may unleash more than $1.2 billion in financing.

Along with reaffirming its commitment to maintain a flexible exchange rate system, the IMF stated that Egypt “has implemented key reforms to preserve macroeconomic stability,” including the unification of the currency rate that facilitated imports.

Earlier on Wednesday, Egypt’s Prime Minister Mostafa Madbouly said Cairo has asked the IMF to modify the targets for the programme not only for this year, but for its full duration, he added without giving more details.

“Discussions will continue over the coming days to finalize agreement on the remaining policies and reforms that could support the completion of the fourth review,” the IMF added in its statement.

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Kenya seeks $750m from World Bank, obtains $200m from AfDB— Official

Published

2 days ago

November 20, 2024

Ifeoluwa Dada

The head of debt management for the finance ministry told Reuters that Kenya had obtained a $200 million loan from the African Development Bank (AfDB) and was negotiating a fresh $750 million loan with the World Bank.

After being forced to abandon proposed tax rises costing more than 346 billion shillings ($2.68 billion) in June due to fatal demonstrations, the East African nation’s administration, which has been grappling with significant debt, has been frantically seeking fresh funding.

The Finance Ministry’s public debt management office director general, Raphael Owino, told Reuters that the IMF’s October clearance of the seventh and eighth reviews, which opened the door for a $606 million loan tranche, had aided the ministry’s talks for more loans.

“The World Bank is coming on board, riding on the back of IMF receipts,” Owino said. “The AfDB is already on board.”

The discussions for more assistance, which came under the World Bank’s “Development Policy Operations” (DPO) with the government, were confirmed by a representative at the organization’s Kenya office.

“The amount of the current (loan) is yet to be determined. The amount will also depend on the implementation of the policy reforms agreed upon,” the spokesperson told Reuters, adding that past DPO loans averaged about $750 million.

In May, the World Bank approved the latest round of DPO loans, totalling $1.2 billion.

According to a statement made last month by Finance Minister John Mbadi, Kenya has set a foreign borrowing goal of 168 billion shillings for the fiscal year ending in June 2025.