Kenya’s Public Debt Management Office Director General Haron Sirima. Nairobi is considering using reserves from the IMF to compensate for Chinese loans it repaid. FILE PHOTO | NMG Kenya had expected to extend a debt repayment moratorium from bilateral lenders, including China, which started in January 2021, by another six months to December 2021.
Chinese lenders, especially Exim Bank, were uncomfortable with Kenya’s push for extension of the debt service suspension with rich nations, prompting delays in disbursements to projects funded by Chinese financiers.
This forced Nairobi to drop its push for the debt repayment holiday extension by China for fear of straining relations with Kenya’s biggest bilateral creditor.
Kenya is considering using reserves from the International Monetary Fund (IMF) to compensate for Chinese loans it repaid after the Treasury dropped an earlier request to defer debt payments.
The National Treasury says it could use its additional allocation of IMF reserves in Special Drawing Rights (SDR) assets, which can be converted to government-backed money, as one of the options to plug the budget hole.
SDRs are the IMF’s unit of exchange based on sterling, dollars, euros, yen and yuan, and can be used to settle obligations like repayment of foreign public debt.
Director-general for public debt management office at the Treasury Haron Sirima said Kenya has an a raft of options including “use of additional SDR allocation by the IMF” to fill the cash hole left after Nairobi started to service loans from China in July.
Kenya had expected to extend a debt repayment moratorium from bilateral lenders, including China, which started in January 2021, by another six months to December 2021, saving it from making payments of nearly Ksh50 billion ($453 million) to Beijing lenders.
Chinese lenders, especially Exim Bank, were uncomfortable with Kenya’s push for extension of the debt service suspension with rich nations, prompting delays in disbursements to projects funded by Chinese financiers.
This forced Nairobi to drop its push for the debt repayment holiday extension by China for fear of straining relations with Kenya’s biggest bilateral creditor.
Dr Sirima said the Treasury has other options, including seeking grants from development partners, changing the funding for “specific” capital projects to public–private partnership (PPP) and tapping the IMF reserves.“In addition, (we also have option) to rationalise further expenditures to the extent of forgone DSSI funding,” he said in an interview with the Business Daily.The IMF is expected to play a role in shaping policy […]