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World bank warns Kenya over borrowing

Negative consequences

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World Bank on Friday issued a warning to Kenya over constant external borrowing that may affect the country's ability to sustain its debts.

A report from the international bank has shown that the country might not be prepared to service the Sh2.7 trillion debt.

The government is expected to pay Sh365 billion in 2019 as part of the loan repayment move.

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Further reports indicated that the loan repayment initiative by the government would drain half of the dollar reserves currently being held by the Central Bank.

"In the future, higher debt service payments, in part due to bullet repayments falling due on maturing international bond issues, coupled with rising global interest rates… exacerbating concerns about debt sustainability,” indicated part of the report by World bank.

Risk of defaulting external loans

This report comes a day after the global lender warned that the country was among several other African countries at risk of defaulting on their external loans.

“Many countries across the region will see future debt service payments rise steeply, or remain elevated, over the next two to five years: Ethiopia, Ghana, Kenya, Senegal, and Zambia are illustrative,” read a part of the report.

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Analysis showed that Kenya, which has not grown its export earnings, is set to struggle to repay the maturing Eurobond in the next three years.

Kenya was added to the list of countries that had dipped into the international capital markets, having been issued Eurobonds worth Sh475 billion since its launch in 2014.

The debt service repayment has been made serious by the need to offset the Sh78.3 billion of the Eurobond in June this year.

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