Kenya has declared its public debt levels manageable through 2026, but a precarious tightrope walk lies ahead.
While the National Treasury's 2024 Budget Policy Statement paints a reassuring picture, global shocks and sluggish export growth cast long shadows.
"Under external debt sustainability analysis, the present value of the external debt to GDP ratio remains sustainable through 2026," the Treasury affirmed but acknowledged troubling breaches in key ratios due to subdued export performance.
The debt-to-export and debt service-to-export ratios currently exceed sustainable thresholds, highlighting the vulnerability of Kenya's external debt position.
Relief lies in the expected economic recovery, predicted by the International Monetary Fund (IMF) to average 5 per cent growth in 2024.
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A revitalized export sector, the Treasury believes, will improve these ratios and strengthen external debt sustainability.
However, immediate challenges loom. The 2024 debt service-to-revenue ratio faces pressure from the June maturity of a hefty $2 billion Eurobond.
Fortunately, Kenya recently secured $1.5 billion from the international market, averting default concerns.
With a total public debt of $73.1 billion (51 per cent external), the government seeks to reduce future risks through concessional borrowing for capital investments.
Additionally, robust remittance inflows and an optimistic export outlook are expected to bolster external debt sustainability.
The path ahead demands cautious optimism. While Kenya navigates the present with a seemingly stable debt position, vigilance and strategic manoeuvring will be crucial to ward off the looming risks and ensure long-term financial stability.
