Kenya on slippery debt cliff in new World Bank report

Kenya's debt levels have come under scrutiny with concerns of debt distress looming over the country. The latest report by the World Bank has raised fears of a potential default if Kenya fails to meet its debt obligations. CNBC Africa discussed this issue with Pamela Akidi, Retail Sales Manager, Global Markets at Stanbic Uganda, who provided a detailed analysis of the situation. With Kenya's total debt standing at 10.8 trillion as of September 2024, a slight improvement from the previous year, Akidi highlighted that external debt had decreased, mainly due to the appreciation of the Kenyan shilling. Despite the challenges, Akidi expressed confidence that Kenya could meet its obligations with support from the IMF, World Bank, and other partners, alongside commercial financing. Akidi also addressed concerns about the country's debt servicing, noting that 70% of it is covered by domestic revenue, which she deemed as high but not unusual. She emphasized the importance for the government to enhance efficiency in service delivery, minimize wastage, and stimulate economic growth to manage debt servicing effectively. Regarding revenue mobilization challenges, Akidi acknowledged the setback caused by the retraction of the finance bill for 2024 in Kenya but highlighted recent tax-related amendments aimed at boosting government revenues by 174 billion Kenyan shillings. Shifting the focus to Uganda, Akidi provided insights into the recent Monetary Policy Committee (MPC) meeting, where the central bank rate was maintained at 9.75%. She attributed this decision to subdued inflation and favorable economic factors. Addressing governance concerns, particularly the fraud incident involving the Bank of Uganda, Akidi assured that investigations were ongoing, and part of the funds had been recovered and returned to the bank's account. She underscored the importance of enhancing internal controls to prevent future fraudulent activities. In terms of currency markets within the region, Akidi outlined the factors influencing the performance of different currencies. The Uganda shilling remained resilient due to remittance and profit inflows, with an expected appreciation in December supported by seasonal trends. The Kenyan shilling faced mild pressure in November but showed signs of stability in December, backed by remittance inflows. The Tanzanian shilling continued to strengthen, buoyed by robust agriculture and mining inflows. Overall, Akidi projected a trend of appreciation or stability for East African currencies in the coming months. As East African countries navigate the challenges posed by debt levels, revenue mobilization, and currency market fluctuations, strategic fiscal and monetary policy measures will be crucial in maintaining financial stability and sustainable economic growth.