Hard times as Treasury reveals plans to use CBK reserves to pay debt

National Treasury Cabinet Secretary Njuguna Ndung’u hints at possible use of CBK reserves to pay Eurobond debt.

Treasury made the reavelation while responding to a note by JP Morgan stating that Kenya was “walking a tightrope” in terms of debt.

CS Ndung’u said the debt crisis was not unique to Kenya, claiming that most low-income countries are experiencing the same thing.

“All low and middle-income countries are walking a tightrope given the current economic constraints globally. The Kenyan case is being featured because of the Eurobond 2024,” Ndung’u remarked.

“The upcoming Eurobond maturity should not be a big deal since Kenya can use its reserves at the central bank to pay off the debt.”

The issue of the Ksh295.8 billion ($2 billion) Eurobond debt, which will mature in June 2024, has been a bone of contention for a while now, with critics who share the same sentiments as JP questioning the government’s ability to pay it off.

JP claims that Kenya’s poor credit ratings have prevented it from accessing capital markets, preventing it from borrowing money to pay down its debt.

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National reserves will also suffer greatly from the massive payment gaps anticipated in 2023 and 2024; according to predictions, if no new revenue sources are proposed, the reserves will have been depleted to Ksh4.9 billion by 2024.

The amount, JP analysts say, cannot even cover three months of basic imports, a major sign of financial distress for Kenya.

This is even as the International Monetary Fund (IMF) signed off Ksh147.8 billion ($1 billion) to Kenya in a bid to dig the country out of the mud.

Despite this cash injection, fiscal and current account deficits are projected to remain at between 5 to 6 per cent over the next 12 months.

The debt situation has prompted the government to introduce and raise several taxes much to the dismay of already struggling Kenyans.

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