History of Kenya’s Public Debt Restructuring


Raila and Ruto, the leading presidential candidates, have promised to seeking a restructuring of the Kenya’s ran away public debt on assuming office. The National Treasury on the other hand, to justify run away accumulation of public debt, has always argued that Kenya has never defaulted on her sovereign debt obligations. That may not be factual.

For the country has for a record of five times, had to kneel before Paris and London clubs, as well as bilateral lenders, to restructure debts and avoid defaults. Here are the notable restructurings.

Restructuring by Paris club creditors

In January 1994, the country was granted debt relief with respect to US$535 M of indebtedness to bilateral creditors on non-concessional terms with an eight-year repayment period, including a one-year grace period. At that time the country was suffering from run-away inflation and Forex reserves had been depleted through Goldenberg scandal.

In November 2000, on verge of default, the country was granted a debt relief with respect to US$301 million of indebtedness to bilateral creditors.

In January 2004, the country entered into rescheduling agreement where approximately US$353 million of debt owed to bilateral creditors was rescheduled

Restructuring by London Club creditors.

In 1998, the London Club creditors rescheduled Kenya’s debts amounting to US$70 million over ten years, including a three year grace period.

Restructuring by Bilateral Lenders

Bilateral Debts has been lenient to the country. The country has received bilateral debt cancellations from Finland, China and Netherlands in diverse past years.

For instance, in 2006, Kenya entered into a debt-for-development swap agreement with the Italian government amounting to US$44 million.

Even though Paris and London creditors may have been graceful in the past, there is no guarantee they will be so in the future.

The commercial lenders, from whom we borrowed Euro-bond, the word restructuring, may not be in their lexicon. Sell your mum and starve your kid, but pay.

Either way, President Raila or President Ruto would have to renegotiate the terms of the loans to forestall a crude default.

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