Kenya’s external public debt dropped by Sh939 billion in the six months to June 2024, as the shilling appreciated against major foreign currencies.
The external debt dropped from Sh6.089 trillion as of the end of December 2023 to Sh5.15 trillion on June 30, 2024, latest reports from the National Treasury show.
“Comparing the stock of external debt as of June 2024 and December 2023, it is noted that the external debt stock had reduced by approximately Sh939 billion (15.4 percent) majorly due to strengthening of the Kenya shilling exchange rate against major currencies during the period,” said the Treasury in submissions to the National Assembly’s Public Debt and Privatisation Committee last month.
In the six months to the end of June, the shilling gained between 15 percent and 22 percent value against different foreign currencies through which the government has borrowed.
Overall, Kenya’s public debt totalled Sh10.56 trillion, composed of Sh5.15 trillion external debt and Sh5.41 trillion domestic debts.
“This represents a decline in Sh579 billion from Sh11.14 trillion or 69.1 percent of GDP in nominal terms as of end of December 2023,” said the Treasury.
While the domestic debt stock increased by Sh360 billion during the six months to June, the Treasury said external debts dropped by Sh939 billion, mainly on account of the stronger shilling.
The huge reduction in the external debt stock was witnessed as the local currency gained value against the US dollar, the euro, the Chinese yuan and Japanese yen, the major currencies against which Kenya has borrowed externally.
Exchange rates against the US dollar came down from 153.15 units as of December to 129.5 units when June ended, the euro reduced from 168.22 units to 138.86 units, and the yen dropped by 22.25 percent to 80.75 units in the six month period.
The exchange rate movements had a huge impact on the composition of Kenya’s public debt, seeing the scales tilt in favour of domestic debt by the close of June, as the proportion of public debt to gross domestic product (GDP) dropped from 69.1 percent to 65.5 percent.
In December, external debt stock accounted for 54.7 percent of Kenya’s Sh11.139 trillion public debt as of then, which came down to 48.8 percent of the Sh10.56 trillion as of June 2024.
“Public and publicly guaranteed debt comprise Sh5.15 trillion (or 48.8 percent of total debt) in external debt and Sh5.41 trillion (or 51.2 percent of total debt) in domestic debt,” said the Treasury.
By the end of December, the external debt had crossed Sh6 trillion for the first time in history as the shilling witnessed one of the sharpest devaluation rates that persisted until February.
By the end of April, dollar-denominated external debt constituted 67.9 percent of Kenya’s external debts, followed by euro-denominated debts (21.4 percent), yuan (4.8 percent) and yen (3.6 percent). Exchange rates for the currencies closed last week at 129.14 units (US dollar), euro (141.85 units), yuan (18 units) and yen (86.68 units).
