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East African Countries Amass $73b in External Debt

The International Debt Statistics 2021 report by the World Bank shows that between 2009 and 2019, countries in the region increased external borrowing by nearly four times, from $19.9 billion to $73.8 billion.

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East African Countries have seen increased borrowing over the past decade, amassing $73.8 billion in external debt.

The International Debt Statistics 2021 report by the World Bank shows that between 2009 and 2019, countries in the region increased external borrowing by nearly four times, from $19.9 billion to $73.8 billion.

During the period, Kenya was the biggest borrower raising the stock of external debt from $8.5 billion to $34.2 billion, followed by Tanzania, from $7.6 billion to $19.5 billion.

Uganda and Rwanda accumulated $13.9 billion and $6.2 billion in external debt over the decade, from $2.7 billion and $1.1 billion respectively.

Burundi, however, saw the stock of its external debt decline from $607.2 million in 2009 to $578.4 million in 2019.

Related: Inflation, oil price threaten East African currencies

In the region, the report shows that in 2019, Kenya spent $3 billion in principal repayments and $1.2 billion in interest repayments, while Tanzania spent $1.1 billion and $200 million respectively.

For Uganda, $166 million went into principal repayment and $115 million in interest repayment, with Rwanda spending $31.5 billion and $133.2 million respectively.

The report states that with almost half of all low-income countries either already in debt distress or at a high risk of it, the burden of debt is bound to worsen with countries borrowing more to tackle the Covid-19 pandemic.

Many countries applied for debt relief with the International Monetary Fund in October, which granted a six-month extension to 28 low income nations with Rwanda being among the beneficiaries.

Total external debt stocks of low-income countries eligible for debt service suspension rose by nine per cent in 2019 to $744 billion, equivalent on average to one-third of their combined gross national income.

Read also: East Africa looks to end illicit gold trade

According to the World Bank Group President David Malpass, the risk is that too many poor countries will emerge from the Covid-19 crisis with a large debt overhang that could take years to manage.”

He added that to build durable economic recoveries, countries will need to achieve long-term debt sustainability.

The report shows that the external debt stock of 120 low- and middle-income countries rose by 5.4 percent in 2019 to $8.1 trillion, a rate of accumulation almost identical to that in 2018, but close to half the 10.5 percent rise in external debt stock recorded in 2017.

The increase in external debt stocks in 2019 was the outcome of net debt inflows of $383 billion.

Countries in sub-Saharan Africa accounted for the largest share of net long-term inflows at 24 per cent, followed by the East Asia and Pacific region.

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NC Interview | African Startups Ecosystems

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Startups in Africa have become a phenomenon. The COVID-19 Lockdown encouraged many businesses to move online with the new normal of doing business virtually.

In the second quarter of 2020, African startups have raised more than $500 million according to Maxime Bayen of GreenTec Capital.

News Central had an exclusive chat with an investor and startup founder, Gulbet Kiros.

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Business Edge | Africa Continental Free Trade Agreement (AfCFTA)

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Today on Business Edge, Tolulope Adeleru Balogun discusses the Africa Continental Free Trade Agreement (AfCFTA) with Andrew Mold, Chief, Regional Integration and AfCFTA, Sub-Regional Office for Eastern Africa, United Nations Economic Commission for Africa.

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Central Bank of Kenya Maintains Rate At 7%

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The Central Bank of Kenya (CBK) has left its benchmark rate unchanged at 7% for the fifth time this year. This came at the end of its Monetary Policy Committee meeting. The current rate, the bank says, is having the intended effect on the economy from its initial implementation in March.

Central Bank Governor, Patrick Njoroge noted that Inflation has remained within the target range of 2.5% and 7.5% and is expected to stay within the range in the near term, “supported by lower food prices and muted demand pressures.”

Economic indicators show a recovery in Kenya’s economy in the second half of 2020. Exports have increased by 2.8% in the January to October period, compared to the same period in 2019.

Foreign exchange reserves have slightly declined and currently stand at $7,952 million, equivalent to 4.89 months of import cover. Despite the decline, CBK says that the forex reserves “continue to provide adequate cover and a buffer against short-term shocks in the foreign exchange market.”

According to the monetary policy committee, Kenyan banks have strong liquidity and adequate capital and the sector has shown resilience in these harsh economic times.

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