The CBK Governor, Patrick Njoroge has warned that the country may default on its debt in the next two years if the current rate of borrowing is left unchecked. The CBK governor told the Senate Committee on Finance and Budget that Parliament has a key role to play in ensuring the government does not take on new debt even as past obligations
Dr Njoroge told the committee that the existing policies are adequate to cap excessive government borrowing if applied aggressively. The governor also told the committee that Kenya has not defaulted in debt repayment from 1963 but warned that specific measures must be applied today to turn this ship and not to wait until the debt comes crashing.”
According to a report done by two Bretton Woods institutions rated Kenya's risk to debt distress as high following poor export earnings due to the Covid-19 pandemic. Kenya is one step away from being categorised as a candidate for default, according to a debt sustainability analysis done by the International Monetary Fund and World Bank.
So bad was the debt situation that country was forced to take a six-month loan repayment holiday from some of its bilateral lenders. The moratorium, arranged under an initiative by G-20 - a group of wealthy nations - saw the country defer payment of at least Sh80 billion from January to June this year.
Njoroge said the government needs to balance the public debt mix to ensure longer maturity periods and lower interest rates to ease pressure on taxpayers.
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