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President William Ruto explained Kenya’s debt situation, downplaying the impact of international financial institutions on Kenya’s economy, and justifying the loans approved during the first year of his administration.
President Ruto said that Kenya was praised by the International Monetary Fund and the World Bank because, for the first time, the county’s priorities and those of international lenders were aligned.
The head of state stated that it was impossible not to take loans, but he had made a decision that his government would not borrow recklessly.
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“You cannot say you will not borrow because that is not possible. However, I have reduced the amount we are going to borrow from Sh1.1 trillion to Sh700 million,” he said.
President Ruto explained that he had plans to reduce Kenya’s budget deficit from the current 4.4% to 0% before the of 10 years.
The head of state divulged that 8 countries in Africa have defaulted on their debts, adding that Kenya would be headed in the same direction were it not for his interventions.
He expressed that the country was on track to repay its debts and was planning to buy back the $2 billion (Sh286 billion) Eurobond that is due in June 2024.
A bond buyback is when a country, company or organization decides to buy back its own bonds from the people who originally lent them money by buying those bonds.
The head of state explained that by buying back Kenya’s bond, the country would repay its dues by December 2023, six months earlier than the due date of June 2024.
President Ruto shrugged off concerns by Moody’s Credit Rating about Kenya’s planned buyback saying that the organisation was being used as ‘tools of colonialism”.
“Many people are waiting for Kenya to default. Some companies that are tools of colonialism called credit rating agencies, they are always predicting whether or not Kenya will default,” he said.
President Ruto said that there is now cause for alarm because Kenya wants to pay back its loans in advance.
He added that international lenders hike interest rates for countries that have defaulted, making a killing in terms of profits.
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“If we create a plan to pay back our loans earlier than expected but under a lower interest rate, is that so wrong?” he questioned.
According to Moody’s Credit Rating, Kenya’s planned buyback could be a signal of distress, with Moody's Debt Service vice president David Rogovic saying he would need to look at the terms of the buyback to ascertain the situation.