In the fiscal year that ended in June, Kenya’s external debt servicing costs increased by Sh5. 4 billion, highlighting the effect of the country’s currency problems on its loan repayment obligations.
In the year leading up to June, the shilling lost about 9. 25% of its value against the dollar, falling to Sh117. 83, which put pressure on the Treasury to raise more money to pay off growing foreign debt.
The central bank’s intervention to try and slow the shilling’s depreciation against the dollar and repayments to bilateral and commercial lenders have both contributed to the decline in Kenya’s foreign exchange reserves.
As a result of the dollar fluctuations forcing the Treasury to reallocate more money for the repayments, Kenya spent Sh305.34 billion servicing debt in the fiscal year that ended in June.
The recognized shilling exchange rate published by the Central Bank of Kenya stood at 122.63 units and a continued slide of the shilling will further balloon Kenya’s external debt.