Kenya’s government is planning to defer around $690 million in debt payments, a sharp u-turn after it declined to join the G20 coronavirus debt relief initiative earlier this year.
In May, the Ministry of Finance said that it would not seek suspension of debt payments under the G20’s Debt Service Suspension Initiative (DSSI`) aimed at assisting poor nations weather the coronavirus pandemic, as it found the terms very restrictive.
“We have been reluctant in the past because of the attendant unintended consequences in terms of those holding private debt,” Finance Minister Ukur Yatani said.
“But now after getting a bit of assurance that it is a matter that can be managed, we are now strongly considering joining the arrangement”.
Yatani added that the decision to join the initiative had been made in principle, and a final decision would be made as early as next week. As part of the initiative the East African nation will retain about $686 million in deferred debt repayments over the term of the relief deal.
The government believes that joining the arrangement was important for the country as it will aid open doors for further funding from the International Monetary Fund (IMF) and World Bank.
“They are trying to introduce this as one of the key prerequisites to accessing resources from the IMF and World Bank,” he said.
Since President Uhuru Kenyatta came to power in 2013, Kenya has stacked up its debt levels significantly with economists, whistleblowers and opposition figures saying that much of the money has either been stolen or wasted in funding hyped projects.
The government is yet again in talks with the IMF on a new lending facility, as Kenya faces huge budget deficits worsened by the coronavirus crisis.
For nearly two years now, it has abandoned expensive commercial debt to cut back on ballooning repayments, while revenue collection has been squeezed by the pandemic.
As part of that strategy, it secured $1 billion in May in the second ever such direct lending for the budget from the World Bank, after the first was processed last year.
Kenya will engage China, one of its key creditors, as part of the process of joining the debt relief initiative, the minister said.