Kenya proposed finance minister says to re-profile debt load

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Kenya plans to use cheaper loans from agencies such as the World Bank to allow it to retire expensive domestic loans and create funds for much-needed spending on items like food, the nominee to the post of finance minister said on Tuesday.

President William Ruto, who was sworn into office last month, is facing serious economic challenges like drought and a surge in prices of basic commodities, at a time when the East African nation is spending a huge share of government revenue on servicing debt.

“We may need concessionary borrowing which will help us to retire some of the very expensive domestic debt,” NjugunaNdung’u, who is Ruto’s nominee to the post of finance minister, told a parliamentary panel vetting his appointment for approval.

Concessionary debt is normally provided by lenders like the World Bank and the African Development Bank. Ndung’u, who served as the central banker between 2007-2015, did not give details of the amounts they will borrow on concessionary terms.

Total public debt stands at almost 70% of gross domestic product, after years of a debt-fuelled infrastructure expansion drive.

Once the government cuts the high cost of servicing domestic debt, it will secure room to provide food to the poor, and start to “signal” fiscal consolidation, he said. If his nomination is approved, Ndung’u will be sworn into office in the next two weeks.

Parliament is controlled by Ruto coalition so it is likely to approve his appointment, along with 21 other cabinet nominees who are also being grilled this week.

Ndung’u said the economic situation was “terrifying” but added that the government has no choice but to press ahead with other plans, including development of the local financial market, even as it deals with the debt and high costs of living crisis.

The government plans to sell shares of 5-10 mature public companies on the Nairobi bourse in the next 12 months, Ruto said last week.

A month ago, the Chinese Foreign Minister, Wang Yi, has revealed that China planned to forgo 23 matured interest-free loans for 17 African nations that are classified as the least developed.

Meanwhile, Tanzania and Kenya might be left out of the Chinese debt relief plan due to the lower-middle-income status of the two countries.

Tanzania, Kenya might be left out of the Chinese debt relief plan