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Kenya to seek soft loans to bridge budget deficit

By Tajuddin
In BUSINESS
Oct 4th, 2016
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Kenya to seek concessional loans to bridge budget deficit.

Kenya to seek concessional loans to bridge budget deficit.

Nairobi, Kenya (Xinhua + DIPLOMAT.SO) – Kenya plans to seek concessional loans to bridge the budget deficit for the 2017/18 financial year, a senior official said.

The National Treasury Principal Secretary, Kamau Thugge, told journalists in Nairobi on Monday that Kenya will borrow up to 4.7 billion U.S. dollars both from local and external sources for the 2017/18 budget.

“We hope to prioritize soft loans because it will help to minimize the degree of foreign exchange rate risk and interest rate risk,” Thugge said on the sidelines of the public sector hearing for the 2017/18 financial year.

Cabinet Secretary for the National Treasury Henry Rotich said on Monday that Kenya’s budget for the 2017/18 financial year is projected to increase to 23.6 billion U.S. dollars, up from the current 21.1 billion dollars.

Thugge said that the government will put in place guidelines to ensure the level of domestic borrowing does not crowd out the private sector from accessing loans.

Since the enactment of an interest rate capping law last month, commercial banks have increased their lending to the government which is considered less risky compared to lending to individuals and corporate entities.

Thugge said that the government plans to use 2.7 billion dollars for interest payments on domestic and external debts and 1.3 billion to repay principal on public debt for the next financial year.

The 2016 National Treasury Debt Sustainability Analysis indicates that Kenya’s external debt remains sustainable. Thugge said that currently the public debt stood at 48.3 percent of the Gross Domestic Product.

The official said the level of foreign exchange reserves was enough to cover more than five months of imports.

The International Monetary Fund has approved a precautionary access of up to 1.5 billion dollars in foreign exchange to cushion Kenya from external shocks.

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