Kenya Rejects G20 Debt Relief Initiative, Says Holding Talks With IMF

Kenya’s Covid-19 Personal and Corporate Tax Relief Measures End Jan 1.

Kenya remains reluctant in accepting debt service relief under the G-20 Debt Service Suspension Initiative to assist in mitigating the impact of COVID-19.

The National Treasury Cabinet Secretary Ukur Yatani Friday said Kenya “seeks a cautious approach” when he downplayed media reports that it had sought to defer $690 million (KSh75 billion) in debt payments under the G-20 debt relief initiative.

“Kenya has not applied for the G-20 Debt Service Suspension,” said Yatani in a statement released Friday.

“Some countries have faced challenges rearranging debt service with creditors with undesirable outcomes. In this respect, Kenya seeks a cautious approach in evaluating the costs and benefits of the offer and make informed decision to safeguard the economic and financial standing of the country,” he added.

However, “Kenya welcomes this intervention among others in form of financial support targeted to the health sector,” said the CS.

The CS argued that economic activity has been picking up following a raft of fiscal and monetary policy interventions and the reopening of the economy besides the challenges.

So far, 75,193 Kenyans have contracted the virus, with 1349 fatalities as of Friday 20, November according to data from the Ministry of Health.

“We are confident that the economy will respond to policy and structural reform measures supported by our development partners.”

The G-20 Debt Service Suspension initiative was introduced in May this year by G20 countries when they offered to suspend debt services for external for middle-income countries.

On the other hand, the NCBA Market Research team says the economic recovery is marred by myriads of uncertainties, including a persistent pandemic, rising political tension, climate change effects, and inadequate policy support.

“Hard hit sectors like travel and tourism will continue to suffer from scarring effects of the pandemic even. At the same time, weak fiscal space and lethargic credit markets may make for a fairly long return to the economy’s pre-covid steady-state.”

Kenya’s public debt hit KSh7.12 trillion in September, a KSh1 trillion rise since September last year.

“While Kenya may still safely carry the projected debt, the growing debt service burden and the inherent vulnerabilities cannot be underestimated. This is being aggravated by both exchange rate exposure for the portfolio as well as potentially higher risk premium both externally and locally,” the analysts note in their October Economic Update.

Treasury indicated that it is holding talks with the International Monetary Fund for a three and a half years program to anchor Kenya’s fiscal policy to stabilize the economy and address emerging vulnerabilities.