Kenya has room to refinance its debt by extending the tenure of some of its loans, the central bank governor said on Tuesday.
Dr Patrick Njoroge told a news conference the national debt stood at 56.5 percent of gross domestic product in September.
It was 42 percent of GDP when President Uhuru Kenyatta came to power in 2013. His government has borrowed heavily to finance infrastructure projects.
“There is scope for the reorganisation of the debt portfolio, including replacing more expensive debt with cheaper debt,” Dr Njoroge said.
In October, the International Monetary Fund increased Kenya’s risk of defaulting on its debt repayments to moderate from low, citing the government’s public investment drive and revenue shortfalls in recent years.
Credit risk easing
Dr Njoroge also said that Kenyan banks have shown resiliency, helped by its efforts to deal with non-performing loans.
The credit risk for banks was easing, he said, but he cautioned lenders against reckless lending. Bad debts among Kenyan banks jumped to 12.4 percent of total credit last year, the highest level in more than a decade.
The economy was expected to expand by 6.3 percent this year, up from an estimated 6.1 percent in 2018, the governor said, driven by an expansion in agriculture and services.
Policymakers held the central bank rate at 9.0 percent on Monday, citing the vibrant economy and inflation within targets.
The narrowing of the fiscal deficit, which the government targeted at 6.3 percent of GDP for the current fiscal year, will afford the central bank flexibility in monetary policy, Dr Njoroge said. The government is targeting a deficit of 5 percent of GDP for the 2019/20 fiscal year.
“We do hope that those plans will work out as they have been put forward, because that will also allow us from the monetary side some room for readjustment, rebalancing in terms of we can now be less tight on the monetary policy,” he said.