East Africa faces impending rise in debt servicing

By EastAfrican

Owing to depreciation of regional currencies, East African economies are facing a potential rise in debt servicing burden.

The depreciation is weighed down by uncertainties in the global economy, disruption of global trade by the Covid-19 pandemic and political jitters linked to the region’s election cycles.

Monetary authorities are concerned about stability of the currencies, with fears their persistent fall in value against major foreign currencies could make repayment of external loans in foreign currencies an arduous task.

The resultant increase in interest payments is expected to be a substantial drain on resources which could have otherwise been used to finance development programmes.

By June this year, EA economies (Kenya, Uganda, Tanzania and Rwanda) had accumulated over $86 billion worth of public debt, with Kenya holding 77.11 per cent of the debt, followed by Uganda (17.4 per cent), Rwanda (five per cent) and Uganda (0.4 per cent).

The increase in the EA debt is largely explained by the countries’ attempts to grow the economies through borrowed funds spent mainly on infrastructural development amid revenue shortfalls.

Kenya’s public debt stands at Ksh7.06 trillion ($70.6 billion) of which domestic and external debt stands at Ksh3.4 trillion ($34 billion) and Ksh3.66 trillion ($36.6 billion) respectively.