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Bond Market News
Kenya’s Debt Servicing Costs Escalate to $11bn
June 1, 2021
Kenya’s debt servicing costs are expected to soar towards KES 1.17tn ($10.9bn) as per the nation’s parliamentary budget office report. According to the report, this rise in debt accompanied by a lack of debt restructuring suggests increased debt default risk and fiscal inflexibility. Kenya, rated B/B+, had previously intended to allocate a lower amount of KES 60bn ($6.1bn) on development projects. In 2022, it is forecasted that debt servicing will amount to 66% of domestic revenue. While Kenya has a six month debt holiday valid till June, central bank Governor Patrick Njoroge said that they are asking for an extension. Lawmakers declared borrowing may no longer be feasible for the nation and instead prompted them to consider alternative financing. Moreover, despite goals for the fiscal deficit to reduce from 8.7% to 7.5% of the gross domestic product, the administration plans to continue borrowing – including $7.3bn in Eurobonds over the next two years.
Kenya’s 7.25% 2028s are currently trading at 111.26 yielding 5.24% on the secondary markets.
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