By The Weekly Vision Business Desk
The International Monetary Fund (IMF) has welcomed Kenya’s move to convert its US$5 billion debt to China from dollars to yuan, describing it as a prudent step that other countries should consider.
“We have seen the kind of discussions that, I think, are still under way or about to be finalised on converting or redenominating some debt into other currencies, as we’ve seen in Kenya. Have we seen that playing out elsewhere? To my recollection, no. I think Kenya is in the vanguard here, and we see it as part of an active liability management exercise that countries should be exploring to see if they can gain any benefit in terms of debt-servicing costs.
“We see countries basically lengthening maturities, and trying to reduce interest rates by issuing in dollars instead of Eurobonds or other currencies,” said Abebe Aemro Selassie, Director of the IMF’s Africa Department, during the release of the IMF’s October Regional Economic Outlook for Sub-Saharan Africa on 16th October.
“As always, it’s important to weigh this against any cross-currency risks and other challenges, including the currency in which a country’s main source of export revenue is denominated. But I think this falls within the scope of active liability management efforts that our countries need to undertake to contain debt service costs. As long as these factors are carefully considered, it’s an initiative we encourage,” he added.
On the ongoing discussions to reach a new credit facility between the IMF and Kenya, after the earlier one was dropped following the government’s failure to meet key commitments such as broadening the tax base in the wake of last year’s Gen Z protests, Selassie said negotiations are still in progress.
“More discussions are continuing. It’s all about trying to better understand and gain clarity on what steps the government wants to take, and what is feasible in terms of reforms over the next couple of years. Those discussions are continuing as we speak, and as soon as we have any progress, we will report on that,” he said.
Selassie further noted that, despite challenging global dynamics, external financing conditions have improved somewhat, allowing a few countries, including Kenya and Angola, to recently access international capital markets.
