KENYA – Kenya has been granted a 6-month debt repayment relief by developed economies also known as the Paris Club following a successful application for the Debt Service Suspension Initiative (DSSI).
The new development will enable the country to devote resources freed to increase spending to mitigate the health, economic and social impact of the Covid-19 crisis
“The Paris Club has accepted Kenya’s application for debt service suspension, which now means that US$300 million of Kenya’s foreign debt owed to 10 bilateral partners under the Paris Club, falling due from 1st January 2021 to June 30, 2021”, said Kenya’s Cabinet Secretary for Treasury, Ukur Yatani.
The country has already signed a Memorandum of Understanding (MoU) with the Paris Club, to be followed by individual Memorandum of Understanding (MoUs) which each country under the Club, covering the terms of payment post-30th June, 2021.
“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”Ukur Yatani – Cabinet Secretary for Treasury, Kenya
“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”, added Yatani.
However, these savings pale in comparison to the US$500 million that Kenya would be left with should China agree to participate in the debt suspension initiative, which freezes loan repayments from January to the end of June.
Nonetheless, the Paris Club suspension offers cash-strapped Kenya some much-needed breathing space as its tax revenues continued to dwindle and the country dives deeper into the credit market to help fund its expansive budget.
Noting that Kenya was eligible to benefit from the G20’s DSSI, the Paris Club agreed to freeze Kenya’s debt repayment from January to the end of June.
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