A 6-month debt repayment relief period has been granted Kenya by developed economies also known as the Paris Club, following a successful application for the Debt Service Suspension Initiative (DSSI).
Ukur Yatani Kanacho, Cabinet Secretary for the National Treasury and Planning said this new development will further enable the East African country to devote resources freed to increase spending to mitigate the health, economic and social impact of the ongoing Covid-19 pandemic.
“The Paris Club has accepted Kenya’s application for debt service suspension, which now means that Sh32.9 billion of Kenya’s foreign debt owed to 10 bilateral partners under the Paris Club, falling due from 1st January 2021 to June 30, 2021”, he noted.
The country already has signed a Memorandum of Understanding (MoU) with the Paris Club, which will be followed by individual MoUs with each country under the Club, covering the terms of payment post-30thJune, 2021.
“In effect, the initiative apart from suspending the payments will give us a total of five years to repay the loans, with a grace period of one year. This is not only timely, but a sign of confidence in the country and will give us the fiscal space to make the much-needed spending on the COVID-19 economic recovery strategy especially in the social, health and economic sectors”, said Yatani.
Kenya also has applied for debt service suspension under the G-20 DSSI framework, for amounts estimated at Sh40.6 billion which is due from January 1, 2021 to June 30, 2021, from non-Paris Club bilateral creditors. The formal approval of the debt service suspension is expected in the weeks to come.
Kenya will however not seek debt service suspension from both its commercial and multilateral creditors, to safeguard its sovereign rating and its access to international financial markets in the near or distant future.