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XINHUA NEWS SERVICE REPORTS FROM THE AFRICAN CONTINENT

 

Analyst urges Kenya to shun short-term
debt to spur macroeconomic stability 

NAIROBI (Xinhua)-- A Kenyan economic analyst on Tuesday urged Kenya to avoid short-term debt in order to promote macroeconomic stability.

Churchill Ogutu, Research Analyst at Genghis Capital Investment Bank, told Xinhua in Nairobi that currently 46 percent of government revenue in the current financial year will be devoted to debt repayment and this figure is expected to reach 50 percent next year.

“Kenya should have preference of long-term debts in order to reduce the percentage of government revenues that goes to debt repayments so that more resources are devoted for development expenditure,” Ogutu said.

He said that the average maturity of the country’s domestic debt stands at less than seven years.

“This means that more public funds need to be set aside to settle debts at the expense of other priorities such as education and health,” he added.

The research analyst noted that short-term commercial debt that was virtually nonexistent prior to the 2011/2012 financial year has gathered momentum in recent financial years.

“More and more debt is being contracted from commercial entities and this poses significant refinancing risk,” Ogutu said.

He noted that with the classification of Kenya as a middle-income country, concessional borrowings from World Bank will be on slightly stringent conditions.

“Kenya therefore needs be to employ innovative methods in order to access cheap loans for its development needs,” he added.

             

 

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