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April 19 - 25, 2013


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Health, education sectors get least
external loans: Finance Ministry

The biggest recipient of the external loans is the
energy sector, followed by general economic and
commercial labor affairs and public administration


NAIROBI (Xinhua) -- Kenya’s health and education sectors receive the least amount of external financing from bilateral and multinational lenders.

A new report from the country’s Ministry of Finance showed that the sectors, though very crucial, received 5.4 percent and 5.6 percent of total external loans extended to Kenya in the period ending Jan. 31.

“Health and education sectors receive the least share of external loan funding,” said the report titled Month Debt Bulletin received on Thursday.

The biggest recipient of the external loans is the energy sector, followed by general economic and commercial labor affairs and public administration.

The energy, infrastructure and information and communication technology sector received 37 percent of the external public debt, which stood at 9.8 billion U.S. dollars at end of January.

Labor affairs sector got 20 percent, public administration 14 percent, agriculture 11 percent and environment 8 percent.

“Overall public and publicly guaranteed external debt increased by 137 million dollars to 9.8 billion dollars in January, from 9.7 billion dollars in December last year,” said the report.

The ministry noted that the rise in the external public debt is because of currency fluctuations.

“The increase can be attributed to the weakening of the Kenya shilling against the Euro and the U.S. dollar,” said the ministry, adding that Kenya’s external debt portfolio is mainly held in Euro (33 percent), followed U.S. dollars (31 percent), Yen (16 percent) and Yuan (6 percent), among others.

According to the ministry, official creditors account for 91 percent of total public and publicly guaranteed external debt.

“Out of this, debts owed to multilateral creditors (5.8 billion) dominate the portfolio (59 percent of the total). Bilateral debt stands at 3.1 billion dollars (31.97 percent of the total), which includes 465 million dollars guaranteed debt,” said the ministry.

In the multilateral category, African Development Bank and International Monetary Fund account for the largest proportion of external credit, while Japan, France and Germany are the leading creditors in the bilateral category.

The commercial bank debt constitutes 7.16 percent (701 million dollars) of the total public and publicly guaranteed external debt.

During the period under review, Kenya’s projected cumulative external debt service stood at 263 million dollars.

“Principal and interest projections for the month of January were 28 million dollars and 15 million dollars respectively. Multilateral and bilateral creditors constitute 49 percent and 44 percent of the cumulative projected debt service respectively during the period under review,” said the ministry.

However, the actual cumulative debt service as at January 31 was 229 million dollars. Actual principal and interest payments for the month of January were 23 million dollars and 6 million dollars respectively.

“Reflecting government external debt strategy of contracting or guaranteeing external loans with highly concessional terms to minimize interest rate cost, the average interest rate and grace period on the external debt portfolio was 0.9 percent and 8 years, respectively. In addition, the average maturity period for external loans was 29 years while the average grant element was 68 percent,” said the debt report.

On the other hand, the East African nation’s domestic debt increased by 329 million dollars to 9.9 billion dollars in January from 9.54 billion dollars in December last year.

Commercial banks remain the biggest holders of the government debt, which is mainly held in Treasury bond (74 percent) and Treasury bills (20.3 percent).

“Commercial banks continued to hold the largest proportion of the outstanding government debt securities amounting to 5.8 billion dollars. The non-banks held 43 percent of the outstanding government paper, mostly Treasury bonds. The non-banks category comprises non-bank financial institutions, National Social Security Fund, parastatals, insurance companies, building societies, pension funds and individuals,” said the ministry.

Foreigners, who invest through nominee accounts in the local banks hold government debt worth 101 million dollars.

According to the Central Bank of Kenya, gross government domestic debt increases by an average of 50 million dollars every week on account of Treasury bills and Treasury bonds.

Overall, as at end January, Kenya’s public and publicly guaranteed debt stood at 21 billion dollars. This is 47 percent of the East African nation’s Gross Domestic Product.

“The structure of public and publicly guaranteed debt shows that 54 percent of the total debt is domestic debt while 46 percent is external debt,” said the ministry.


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