Rwanda’s loans from the domestic market are the cheapest compared to other East African Community member states.
Kenya’s loans from the domestic market are now 60 percent more expensive than its regional peers, including Tanzania and Rwanda, revealing the higher risk investors are attaching to lending to the government at a time it is desperate for cash.
Kenya’s overall public debt has increased in recent years. Gross public debt increased from 44.4 percent of GDP at the end of 2015 to 71 percent of GDP at end of 2020, reflecting high deficits, partly driven by past spending on large infrastructure projects, and in 2020 by the Covid-19 global shocks.
About half of Kenya’s public debt is owed to external creditors.
Kenya’s crippling dollar shortage is driving away investors, turning a once-booming stock market into the worst in the world.
Nairobi’s All-Share Index has plunged 19% this year, the steepest drop among the almost 100 global indexes.
According to the Central Bank of Kenya (CBK), the plunge of the Kenyan shilling has been so substantial that it has even breached the regional reserves policy.
The East Africa Community (EAC) forex reserves policy specifies that a member country must have in its coffers at least four months worth of forex reserves in terms of imports cover at any given time.
Kenya’s reserves have been below the required levels since Jan. 26.
Experts opine that the Kenyan currency hasn’t quite recovered from the global economic crisis sparked by the covid-19 pandemic which stifled the country’s key exports thereby cutting its inflows.
The Kenya Association of Manufacturers (KAM) has stated that many manufacturers and processors are now struggling to do business due to scarcity of dollars in commercial banks which they use to source for raw materials in foreign markets.
The cause of the dollar shortages has been attributed to various factors — including declining exports, high import bills and reduced remittances — leading to some firms seeking foreign currency in neighboring Tanzania.
