KENYA is rapidly becoming the next flashpoint in the Africa debt crisis amid a dramatic increase in borrowing that threatens to submerge the economy.
The Parliamentary Budget Office (PBO) warned on Friday that the country’s ballooning debt is forecast to increase by 15 percent next year to a record $69bn. If borrowing continues at the current pace, the PBO report said the debt could go as high as $84bn the following year.
A sizable portion of that debt is owed by the struggling Kenya Railways Corporation (KRC) that now tops the list as the country’s most indebted state-run company due largely to billions of dollars borrowed from China to build the Standard Gauge Railway (SGR).
Since most of those SGR loans are in dollars (67.3 percent), the cost of servicing that debt is going up, seemingly by the day, due to the declining value of Kenya’s currency that’s fallen by 7.4 percent since the beginning of the year.
KRC currently owes $4.9bn, mostly to the China Exim Bank, and has already defaulted on a $370 million loan that was due earlier this year to the Chinese-owned operator of the SGR.
The situation isn’t expected to improve soon, according to the PBO, given that debt servicing costs next year are expected to eat up a staggering 49 percent of ordinary revenue.
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