The government is unable to repay the KSh 77 Billion syndicated loan which was due on October this year. It has requested the creditors to extend the repayment by six months to April 2018. It is said that 10% of the creditors are against the extension.
Treasury is now making plans to do another Eurobond to repay this syndicated loan. Kenyans should remember that the reason we took the initial Eurobond was to repay another KShs 53 Billion syndicated loan in 2014.
In 2013 Kenya owed only KShs 57 Billion in expensive commercial foreign debt. Today that figure is over KShs 600 Billion and growing fast. This is a dangerous trend whose impact will be clear soon. If today we can’t repay KShs 77 Billion on time what will happen when more of these loans fall due?
This international refinancing is unsustainable and unwise because it is replete with risks and its success is not guaranteed with prevailing political instability.
We have argued many times that the debts we are piling up are not productive. If these debts were put to useful activities we would not be having problems paying up.
It is sad the Kenyan media has never given these issues the attention they deserve. Many people on social media have been thinking this is another simple issue of Jubilee vs NASA politics. It is not and soon we will know why.
By Economist Ephraim Njenga