In Summary
  • Kenya, Rwanda and Tanzania, which have debt maturities starting in 2020, are currently facing rising currency risk that could jeopardise their loan repayments.
  • Kenya is expected to pay $4 billion in the second tranche of the first Eurobond issue in 2024.
  • Rwanda, which issued its $400 million bond in 2013 will have its debts repayment obligations due in May 2023, while Tanzania will have its turn in March 2020, on the $600 million seven-year private placement obligations that it issued in 2013.

Kenya, Rwanda and Tanzania are among 14 sub-Saharan countries that will struggle to pay their loans post 2021, owing to rising currency risk.

According to the World Bank Pulse report released last week Wednesday, these three regional economies, which have debt maturities starting in 2020, are currently facing rising currency risk that could jeopardise their loan repayments.

“Large Eurobond repayments from 2021 could pose significant refinancing risks in the region. Sharper than anticipated currency declines could make the servicing of foreign currency denominated debt, already a rising concern in the region, more challenging,” the Bank said, adding that financial market pressures have intensified in some emerging markets and concern about their dollar-denominated debt has risen as the dollar strengthens.

The latest data from Bloomberg shows that Kenya will have its first Eurobond repayment obligations next year, with its second one coming in 2021. Nairobi is also expected to pay $4 billion in the second tranche of the first Eurobond issue in 2024.

MANAGING NEW RISKS

Rwanda, which issued its $400 million bond in 2013 will have its debts repayment obligations due in May 2023, while Tanzania will have its turn in March 2020, on the $600 million seven-year private placement obligations that it issued in 2013.

Albert Zeufack, the World Bank’s chief economist for Africa, said policymakers in the region must equip themselves to manage new risks arising from changes in the composition of capital flows and debt.

“To accelerate and sustain an inclusive growth momentum, policy makers must continue to focus on investments that foster human capital, reduce resource misallocation and boost productivity,” Mr Zeufack said.

According to the report, the region's public debt continues to rise in some countries, and rising interest rates associated with the changing composition of debt may put the region’s public debt sustainability further at risk.

“Other domestic risks include fiscal slippage, conflicts, and weather shocks. Consequently, policies and reforms are needed that can strengthen resilience to risks and raise medium-term potential growth Reforms should include policies that encourage investments in non-resource sectors, generate jobs and improve the efficiency of firms and workers,” Cesar Calderon, the lead author of the report said.

The World Bank says a faster than expected normalisation of monetary policy in the US could result in sharp reductions in capital inflows, higher financing costs, and rapid exchange rate depreciations, especially in countries with weaker fundamentals or higher political risks.

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