Kenya at high risk of debt distress over exorbitant interest rates on Chinese loans, IMF warns

The International Monetary Fund (IMF) has in a recent review warned that Kenya is at a high risk of debt distress.

This is after the global financial body found that Kenya uses nearly half of its tax collection to service interest on loans, a situation similar to countries in debt distress like Burundi.

“General government debt has risen to 57 percent of GDP, which is the highest in the EAC (East African Community) region, except for Burundi. This has led the debt servicing to revenue ratio to more than double since 2011 and the ratio is projected to reach 40 percent in 2019, a level typically only associated with countries at high risk of debt distress,” the IMF warning reads in parts.

Official data shows that Kenya needs to pay Sh441 billion in loan interest this year, an amount that will rise to Sh475.9 billion next year, before rising to a high of Sh483 billion by 2022. This will be paid through collected revenue.

The country will spend another Sh255 billion to repay principal loans this year, and this will rise to Sh320 billion next year and Sh378 billion in 2022.