International creditors, under the Paris Club, said on Monday it approved a six-month long debt relief scheme for Kenya, under a new arrangement backed by the Group of 20 (G20) most advanced economies.
“This initiative will also contribute to help the Republic of Kenya to improve debt transparency and debt management,” the Paris Club creditors said in a statement.
The representatives of the Paris Club creditors accepted to provide to Kenya a time-bound suspension of debt service due from 1st January to 30th June 2021.
The agreement would enable Kenya to delay the repayments of nearly US$ 690 million, a move the national treasury in Kenya hopes would encourage more creditors to further lend to the East African nation as it continues to fight the coronavirus pandemic.
According to the Paris Club, the term sheet of the Debt service suspension Initiative (DSSI) and its addendum also endorsed by the G20, the Paris Club recognized that the Republic of Kenya is eligible to benefit from the initiative.
Kenya is expected to commit to devote the resources freed by this initiative to increase spending in order to mitigate the health, economic and social impact of the COVID19-crisis, the Paris Club said.
Kenya is also committed to seek from all its other bilateral official creditors a debt service treatment that is in line with the agreed term sheet and its addendum.
Earlier, Kenya was reluctant to apply for the debt rescheduling fearing such an arrangement would downgrade the country’s ability to service its debts and dampen the country’s ability to service foreign debts.
“Paris Club creditors will continue to closely coordinate with non-Paris Club G20 creditors and other stakeholders in the ongoing implementation of the DSSI, so as to provide maximum support to beneficiary countries,” the Club said.
The Paris Club was formed in 1956. It is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by borrower countries.
The members of the Paris Club which participate in the reorganization of Kenya’s debt include the governments of Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Republic of Korea, Spain and the United States of America. (PANA/NAN)