Kenya’s Foreign Reserves Drop After Repaying Loans to China
Kenya’s foreign exchange reserves have fallen by USD 487 million (about KES 63.9 billion) over the past week due to substantial external debt repayments. This includes USD 433 million (KES 56.8 billion) to China for the Standard Gauge Railway.
According to the Central Bank of Kenya’s latest weekly bulletin, the forex reserves decreased from USD 7.896 billion on July 11 to USD 7.409 billion on July 18. This reduction has lowered the import cover from 4.1 months to 3.9 months, meaning the available foreign exchange reserves can now finance fewer months of imports.
In the 2014-15 fiscal year, Kenya borrowed USD 5.08 billion (KES 667 billion) for the Mombasa-Naivasha railway project. Following recent repayments, the Kenyan shilling weakened from KES 163 per dollar earlier this year to KES 131 per dollar.
In the last fiscal year, Kenya repaid China USD 1.15 billion (KES 152.69 billion), including USD 705.05 million (KES 100.47 billion) in principal and USD 366.46 million (KES 52.22 billion) in interest. Additionally, Kenya paid USD 286.04 million (KES 40.76 billion) more than initially planned for the fiscal year.
The secretive nature of Beijing’s loan terms with developing countries like Kenya often means borrowers must prioritize repayments to China, placing a considerable burden on the Kenyan public.
Doubts Revealed
Foreign Reserves -: Foreign reserves are like a country’s savings in foreign money, which they use to pay for things from other countries or to pay back loans.
USD -: USD stands for United States Dollar, which is the money used in the United States. It’s often used in international trade and finance.
External Debt -: External debt is the money a country owes to other countries or international organizations. It’s like borrowing money from a friend who lives far away.
Standard Gauge Railway -: The Standard Gauge Railway is a big train project in Kenya that helps people and goods travel faster and more easily across the country.
Import Cover -: Import cover is how long a country’s foreign reserves can pay for its imports. It’s like how long your pocket money can last if you keep buying candies every day.
Kenyan Shilling -: The Kenyan Shilling is the money used in Kenya, just like we use the Indian Rupee in India.
Fiscal Year -: A fiscal year is a 12-month period that governments and businesses use for accounting and budgeting. It’s like a school year but for money matters.
Principal -: Principal is the original amount of money borrowed, not including any extra charges like interest.
Interest -: Interest is the extra money you have to pay back when you borrow money, like a fee for using someone else’s money.
