Our cover story, is about Kenya’s debt crisis. Clearly, it is a topic that is exercising many people’s minds at the moment. Under the heading: Can Kenya avoid the jaws of the debt trap? Our correspondent says all the signs are that Kenya is on the brink of a debt trap and that unless present policies are critically reviewed and urgently amended, the already struggling economy could be pushed over the edge by unmanageable debt. The need for a re-evaluation of government fiscal policy is brought to the fore by the announcement that Kenya has quietly floated a $2 billion Eurobond to raise cash to pay for infrastructure projects and to support recurrent expenditure.
The writer further says that over the 30- year life of the bond, the investors will be paid $3.2 billion in interest. What is at the same time encouraging and ominous is that the issue was oversubscribed seven times. That fact is encouraging because it means that well-heeled, savvy investors still regard Kenya as a safe investment, but at the same time ominous because the Government may be tempted to go back to the market and mop up the additional $12 billion that was on offer. The temptation is greater because Moody’s Investors Service, the US based credit rating agency has downgraded Kenya government bonds from Ba1, “speculative with substantial credit risk”, to Ba2, which is a flag to investors that the credit risk has increased. In the other feature titled - Kenya’s National Debt: Is Kenya heading towards bankruptcy? The author brings you up to speed with what is going on, by among other things, telling you what others are saying. Sample this; “Kenya Lost IMF Credit in June. Someone Tell the Central Bank” screams Bloomberg’s headline to a story that was filed at midnight at the end of February 19, 2018. The writer says that immediately below this headline were two summaries of what appeared in the subsequent article: they read: “IMF withdrew permission for Kenya to tap standby loan in June: IMF delegation visiting Kenya this week to discuss new program”.
One of the paragraphs in the main article reads: “The Washington-based lender, which has a delegation visiting Kenya this week, removed permission to tap the precautionary financing after the government failed to meet budget deficit targets attached to the loan agreement. It’s the first time the withdrawal of access has been made public”. He further states that on February 20, 2018, the International Monetary Fund (IMF) resident representative in Nairobi, Jan Mikkelsen, issued the following statement: “Further to some press reports earlier today, I would like to clarify the status of Kenya’s Fund supported program. The precautionary Stand-By Arrangement/Standby Credit Facility (SBA/SCF) arrangement remains in place until end-March 2018. The second and third reviews of the program, due respectively in June and December 2017, could not be completed on schedule as agreement could not be reached on stronger fiscal policies, and discussions were postponed due to the prolonged election period.