Kenya’s debt trap to push nation towards further fiscal consolidation

Kenya finds itself at a critical juncture as the country grapples with mounting debt distress and the need for fiscal consolidation to stabilize its economy. Wohoro Ndohho, MD at Sandbox, weighed in on the nation's economic challenges in an interview with CNBC Africa. Ndohho highlighted the impact of exogenous factors such as the global COVID-19 pandemic and the conflict in Russia, which have added to Kenya's debt burden. The disruptions in international supply chains and the devaluation of the currency have further compounded the economic woes, making it imperative for the government to make tough decisions to avert a full-blown crisis. The government's plan to float a new euro bond and the cash crunch affecting civil servants have raised concerns about the country's borrowing appetite and the sustainability of its debt levels. With debt repayment soaring in recent months, there is a pressing need for the national treasury to prioritize fiscal discipline and cut down on wastage. Ndohho emphasized the importance of signaling commitment to fiscal consolidation to restore credibility and attract potential investors. Amidst threats of shutdowns by county governors over delayed disbursements, the government faces the challenge of injecting liquidity into the economy while meeting its debt obligations. Ndohho underscored the critical need to prioritize debt payments and explore options such as debt rescheduling and multilateral loans to manage the debt burden effectively. Despite the daunting task ahead, Ndohho remains hopeful that with strategic financial decisions and aggressive revenue collection measures, Kenya can navigate through the current economic storm and pave the way for long-term stability.