Kenya among nations struggling with debt pressure - UNCTAD

Kenya is among countries struggling to keep pace with debt repayment, according to the United Nations Conference on Trade and Development (UNCTAD).

The UN trade body says efforts by multilateral bodies like the World Bank and the International Monetary Fund (IMF) to help the countries restructure their fiscal policies is not yielding fruit.

The comment comes just days after Kenya agreed with the International Monetary Fund (IMF) to terminate the ninth review under the current Extended Fund Facility and Extended Credit Facility programmes started in 2021.

Addressing the 14th International Debt Management Conference that concluded in Geneva on Wednesday, UNCTAD Secretary-General Rebeca Grynspan urged reforms to prevent the current debt crisis from derailing progress.

“Behind us lies a system that needs reform; before us, the chance to build one that serves people and stability, long-term development, not recurring default,” Grynspan said in her opening remarks.

In 2024, developing countries’ external debt hit a record $11.4 trillion, or 99 per cent of their export earnings. International Development Association (IDA), the soft loan affiliate of the World Bank, which helps the world’s poorest countries, ranked Kenya fourth with high-interest payments as a share of export earnings.

Data released by IDA in December reveals Mozambique led the rankings with 38.3 per cent, followed by Senegal at 25.9 per cent, and Pakistan at 13.6 per cent.

Kenya narrowly surpassed Dominica, which recorded 10.3 per cent. Kenya’s debt service costs on external debt more than doubled in 2024, rising from Sh403 billion to Sh839 billion.

This sharp increase was attributed in part to the maturity of the Eurobond 2024.

Kenya’s rising debt obligations have raised concerns about the country’s fiscal stability, as increasing resources are allocated to debt servicing at the expense of vital development needs.

UNCTAD boss regretted that instead of financing essential infrastructure, education and healthcare, rising debt burdens are forcing governments into difficult trade-offs.

Currently, some 3.3 billion people live in countries that spend more on debt servicing than on either health or education. Interest payments outweigh climate investments in almost all developing countries, limiting their ability to respond to global challenges.

“This forces countries to choose to default on their development to not default on their debt. No more defaults on debt but yes on development,” Grynspan warned.

The message from the 14th International Debt Management Conference was clear: Urgent reforms are needed to ensure debt serves as a tool for progress, rather than a barrier.