Policy Brief No. 17 of 2022-2023 on External Public Debt Servicing

Abstract

Prudent external public debt service management is integral in ensuring external debt service does not place an unbearable burden on the current and future generations. It is also pivotal in informing the optimal debt strategy for mitigating or reducing exposure to foreign exchange rate risks in the medium to long-term associated with external debt repayments. Additionally, it safeguards the National Government’s ability to service the external public debt without compromising the fiscal capacity to fund the provision of public services and development projects. Kenya’s external public debt stock has expanded tenfold within the last two decades from Ksh 405.35 billion in 2000 to Ksh 4.17 trillion in 2021. Further, the structure of external public debt changed with the commercial component of public debt increasing significantly since 2000. This has resulted in a tenfold expansion in the external public debt service from Ksh 34.48 billion in 2000 to Ksh 328.12 billion in 2021.1