Kenya: Debt Sustainability Analysis

Abstract

Kenya’s risk of external debt distress remains low, while overall public sector debt dynamics continue to be sustainable.1 However, margins have generally narrowed. Public debt has risen in recent years, with most new debt financing infrastructure intended to address bottlenecks and boost sustainable growth. The bulk of Kenya’s external public debt carries concessional terms, but recent commercial borrowing entails significant repayment needs in 2017 (2015 syndicated loan), in 2019 and, especially, in 2024 (2014 sovereign bond issuance). In the event of a more permanent substitution of external for domestic finance, longer maturities would be needed to avoid bunching of repayments. Reduction of the fiscal deficit over the medium term is also essential to limit and eventually reverse the rise in public debt ratios. 1