Kenya's external debt portfolio reduced significantly following the strengthening of the shilling during the first three months of 2024.
As detailed in the National Government Budget Implementation Review Report by the Controller of Budget, the external debt portfolio was reduced by 15.8 per cent between January - March 2024.
CoB Margaret Nyakan'go revealed that the 15 per cent translated to slightly over Ksh900 billion.
According to the report, in December 2023, the external debt portfolio stood at Ksh6,089,584,982,643. In December, the dollar was averagely trading at Ksh156.
On the other hand, at the end of March 2024, the debt portfolio dropped to Ksh5,129,754,574,040.
Therefore, the difference in the external debt portfolio between January 2024 and March 2024 amounts to Ksh959,830,408,584.
In her explanation, Nyakang'o detailed that the significant drop was occasioned after the shilling gained by 24 points against the dollar.
"During the reporting period, the value of the Kenyan Shilling increased by 24.66 points compared to the US Dollar, causing a 15 per cent reduction in the external debt portfolio in the three months from January 1 to March 31 2024.
"The fluctuation of foreign exchange rates significantly impacts the cost of servicing the external debt," read the report in part.
The drop was also explained by the fact that most of the external debt is dominated by dollar loans. Therefore, should the exchange rate drop, the external debt portfolio will also drop.
Likewise, should the exchange rate increase, the external debt portfolio will also increase.
On the other hand, Nyakang'o reported that there was an increase in domestic debt. Overall, Kenya's debt also increased by 1 per cent.
As of June 20, 2023, Kenya has a debt of Ksh10.28 trillion. This figure rose to Ksh11.14 trillion as of June 30, 2023.
"As of 31st March 2024, the Public debt stock stood at Ksh10.42 trillion, comprising Ksh5.16 trillion (49.6 per cent) dues to external lenders and Ksh5.26 trillion (50.4 per cent) dues to domestic lenders," read the report in part.
The strengthening of the shilling has been attributed to a number of factors including the repayment of the Eurobond which was due in June this year.
Kenya's involvement in the Eurobond Market early this year is reported to have increased the confidence of investors who are now willing to put their money in the Kenyan market.
On the other hand, the strong diaspora community has strengthened the Shilling through their remittances.
Notably, the World Bank ranked the shilling as the best-performing currency in sub-Saharan Africa.
"The Kenyan shilling is the best-performing currency in the subcontinent as it recorded an appreciation of 16 per cent so far this year. After strengthening by 14 per cent by mid-February, the Zambian kwacha has lost some ground and recorded a year-to-date appreciation of 2.4 per cent as of mid-March," World Bank noted in its April 2024 report.
