World Bank report calls for more transparency over Kenyan debt

The World Bank has called for more transparency from African countries when it comes to managing their external debt.

In a new report released this week, the World Bank says that “for both borrowers and creditors to safeguard debt sustainability, and for governments to design effective macroeconomic policies, debt transparency is critical.

It adds that “accurate and comprehensive information on the levels of debt, as well as its composition, is more necessary than ever.”

The report says that Kenya’s external debt is at the highest figure it has ever been and now exceeds the maximum recommended level in relation to Gross National Income (GNI) according to the World Bank report.

Current Kenyan debt levels stand at $26,830 million, more than three times the level they were in 2010 ($8856) and represent 34 percent of GNI as well as two and a half times the total value of Kenyan exports.

Current Kenyan GNI stands at $87,180 million while Kenya’s reserves in relation to debt stands at their lowest level for ten years at around 26 percent, barely more than half what they were in 2010, at 48 percent.

Kenya is among a number of developing countries described by the World Bank as being “on a deteriorating debt trajectory since 2009” while net financial flows to low- and middle-income countries (excluding China) – including both debt and equity – tumbled 28 percent last year to $529 billion. The report also talks about “growing debt vulnerabilities” among many developing countries.

This World Bank says its new Debt Statistics report “provides the clearest picture yet of government borrowing and sources of lending (as) for the first time, IDS features detailed data on borrowing by public corporations and guarantees provided by governments, which sheds light on their contingent liabilities.”

The report adds that Sub-Saharan African countries as a whole have been recording the highest increases in external debt since the 2008 crisis. It adds that this “rapid rise in debt accumulation and the shifts in debt composition pose new challenges (to governments in) managing it.”

Sub-Saharan countries excluding South Africa saw debts stocks swell by 8 percent on average in 2018, and over half the countries in the region have seen external debt stocks double since 2009.

Ugandan debt levels have also increased dramatically from $2979 in 2010 to $12,330 million in 2018 while in Tanzania debt levels have risen from $8892 million to $18,367 million over the same period.

The report says that the increase in external debt stock is more pronounced for some African countries than others. At the top of the range, the report shows an 885 percent increase for Ethiopia, 521 percent for Zambia, 437 percent for Uganda, and 395 percent for Ghana.

“The share of low- and middle-income countries with debt-to-GNI ratios below 30 percent has shrunk to 25 percent, down from 42 percent ten years ago,” the report says. “Similarly, the share of countries with high debt-to-export ratios has climbed.

“To grow faster, many developing countries need more investment that meets their development goals,” World Bank Group President David Malpass said.

“Debt transparency should extend to all forms of government commitments, both explicit and implicit. Transparency is a critical part of attracting more investment and building an efficient allocation of capital, and these are essential in our work to improve development outcomes.”