The Lower Eastern Times Opening The Third Eye
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Kenya ranks eighth highest in Africa for its external debt obligations, according to a recent report. The country is one of 23 nations expected to allocate more than 20 percent of their revenue towards paying off external debts.
This financial burden has escalated significantly for Kenya, with projections indicating it will dedicate 26.1 percent of its domestic revenue to servicing these loans in the current year.
Angola leads the continent in this regard, using 59.8 percent of its revenue for debt repayment, followed by Zambia at 43.5 percent, Egypt at 38.8 percent, Djibouti at 37.8 percent, Tunisia at 31.4 percent, Gabon at 29.1 percent, and Benin at 27.3 percent.
Kenya’s payments on external debt have risen sharply from an average of six percent of government revenue between 2008 and 2016 to 26 percent this year.
The report by Debt Justice, in partnership with Christian Aid, highlights that nearly half of Kenya’s external debt payments from 2023 to 2025 will go to private creditors, mainly bondholders, due to their high interest rates and short repayment periods.
China holds about a quarter of Kenya’s external debt, with the remainder owed to multilateral lenders and other governments.
This escalating debt burden threatens Kenya’s ability to maintain its debt relief status, which had been recognized by the International Monetary Fund in previous decades. The report underscores that when external debt payments exceed 14-23 percent of government revenue, countries typically encounter difficulties in meeting their financial obligations.
Moreover, as Kenya’s debt repayments have surged, public spending has declined significantly. Between 2017 and 2022, real per capita public spending (excluding interest payments) dropped by 15 percent.
This reduction has adversely affected essential services such as healthcare and education, leading to shortages in medicines and delays in funding for schools and social protection programs.
The situation has sparked widespread public concern and protests, prompting President William Ruto to establish an independent task force to conduct a thorough audit of public debt.
The report calls for comprehensive debt cancellation across the board, advocating for a fairer global economic system that does not perpetuate poverty for the majority while enriching a select few.
In summary, Kenya’s mounting external debt poses significant challenges to its economic stability and public welfare, highlighting the urgent need for sustainable debt management strategies and global financial reforms.
