Loan write-offs in Bangladesh's banking sector have more than tripled in the first half of the year, reaching Tk4,513 crore ($530 million) [386ce210]. The increasing amount of defaulted loans in banks is directly leading to a corresponding increase in written-off loans [386ce210]. By the end of June, the total written-off loans amounted to Tk67,721 crore ($7.9 billion) [386ce210]. The banking sector's total default loan reached Tk1,56,039 crore ($18.3 billion) in June, accounting for 10.11% of the total outstanding loans [386ce210]. Additionally, Bangladesh's foreign loan interest payments have tripled in the July-September quarter of the current fiscal year, reaching Tk4,147 crore ($378 million), compared to Tk1,297 crore ($137 million) in the same period last year [0146443c]. The government aims to secure $8.977 billion in loan commitments in the current fiscal year, with Japan providing the most commitments at $1.5 billion in the first quarter [0146443c]. However, the disbursement of foreign loans has decreased by 5% compared to the same period last year, due to a lack of capacity to implement development projects [0146443c]. The government's expenses on interest payments rose 22.14 percent year-on-year to Tk 92,538 crore in the last fiscal year due mainly to a higher cost of borrowing [2ae271c4]. The ongoing volatility in the foreign exchange market and the liquidity shortage in the banking sector are major factors contributing to the increase in interest rates [2ae271c4]. The interest expenditure of the government is increasing faster than the revenue growth, posing a challenge [2ae271c4].
Kenya is set to receive new loans totaling about Sh2.1 trillion from the World Bank and the International Monetary Fund (IMF) over the next three years [1bd6cafd]. The IMF approved additional financing of $938 million through the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) program [1bd6cafd]. The World Bank will lend about Sh1.83 trillion to Kenya over the next three years [1bd6cafd]. The loans come with tough conditions, and there are concerns about the country's growing reliance on external loans [1bd6cafd]. The National Treasury states that the concessional financing from the IMF and World Bank is critical for the country due to elevated interest rates [1bd6cafd]. Kenya's public debt could exceed Sh10.9 trillion by June 2024, and the IMF and World Bank loans will increase it past Sh13 trillion by the end of the three-year period [1bd6cafd]. President William Ruto plans to use retirement savings to borrow and reduce reliance on external loans [1bd6cafd]. The government has amended the debt ceiling and aims to decrease the fiscal deficit as a share of GDP [1bd6cafd]. Commercial banks in Kenya hold a record $6.32 billion in dollar holdings [1bd6cafd].
Nigeria received the highest amount of financing with $2.9 billion from the World Bank in 2022 [7f22fdee]. Tanzania followed with $2.7 billion in fresh debts [7f22fdee]. New external loan commitments to public and publicly guaranteed (PPG) sector entities fell in 2022 for a second consecutive year, decreasing 23% to $372 billion [7f22fdee]. Multilateral creditors rose by 1.5% in 2022 to $115.6 billion [7f22fdee]. Over the past decade, the rise in the external debt stock of low- and middle-income countries (LMICs) has outpaced economic growth [7f22fdee]. Total net debt flows to LMICs turned negative in 2022 for the first time since 2015 to outflows of $185 billion [7f22fdee]. The ratio of total external debt stock to gross national income for LMICs declined by 2 percentage points in 2022, to 24% [7f22fdee]. Public and publicly guaranteed (PPG) debt service payments by LMICs totaled $443.5 billion in 2022 and are forecast to continue to grow [7f22fdee]. Debt service on PPG external debt is expected to rise 10 percent in 2023/2024 [7f22fdee]. LMICs have become more vulnerable to currency risk as the share of external PPG debt in foreign currencies has increased [7f22fdee].
The National Treasury of Kenya is considering accessing the external commercial debt market in the 2024/2025 fiscal year, aiming to raise Sh151 billion from a sovereign bond or other commercial financing [96149e27]. This is part of the government's plan to target Sh326.2 billion in net foreign financing for the budget deficit [96149e27]. The government has relied on concessional financing from the IMF and the World Bank, but it expresses a preference for commercial debt for economic enabler projects that cannot secure concessional financing [96149e27]. The State faces a budget deficit of Sh704 billion in the 2024/2025 fiscal year, which will be financed through domestic loans worth Sh377.7 billion and external borrowing worth Sh326.2 billion [96149e27]. The borrowing targets may be revised periodically due to changing financing conditions and expenditure and revenue plans [96149e27]. The tough financing conditions that have prevented Kenya from floating a Eurobond are expected to ease once the US starts cutting its base lending rate [96149e27]. The Federal Reserve has indicated that it expects to make three rate cuts next year, which could reduce its current policy rate of 5.25 percent to 5.5 percent [96149e27]. High US interest rates have made it difficult for smaller economies like Kenya to access international lenders [96149e27]. Kenya's Eurobond yields in the secondary market have reached highs of 22 percent in July 2022, but have since moderated to the current range of 9.8 percent to 13 percent [96149e27]. The Central Bank of Kenya faces pressure to keep a lid on the cost of government borrowing [96149e27]. The Treasury plans to increase the budget to nearly Sh4.2 trillion from the Sh3.9 trillion revised estimates for the current fiscal year [96149e27].
Kenya's external debt service has increased due to the weakening shilling. The shilling exchanged at KSh 157 per US dollar, pushing debt servicing of loans like the Standard Gauge Railway (SGR) up by KSh 14 billion in January 2024. President William Ruto's administration will pay $2.23 billion (KSh 351.7 billion) in June 2024 to settle external debts. Other loans that Kenyans will have to pay include Eurobond, Africa Trade Development Bank loan, France loan, and World Bank loan. The weakening shilling has affected the repayment of these loans, with the SGR loan repayment for January 2024 growing by KSh 14 billion. The Eurobond faces a debt service of $31.5 million, while the Africa Trade Development Bank loan requires a payment of $23.2 million. Kenya owes the French government $19 million and the World Bank expects a debt repayment of $8.07 million. In November 2023, the World Bank pledged a financial package of $12 billion to Kenya. The financial aid will be distributed over three financial years, FY24–FY26. [5a5ee3a3].
Kenya has signed grant agreements with the United States and South Korea totaling KSh 1.17 billion [6cec0979]. The grants aim to support public sector procurement and enhance maternal health services in the country [6cec0979]. The United States ambassador to Kenya, Meg Whitman, and CS for Treasury, Njuguna Ndung’u, signed a grant agreement of about KSh 198 million for public procurement [6cec0979]. Korean Ambassador to Kenya Sung-jun Yeo and CS Treasury, Njuguna Ndung’u, signed a KSh 980.5 million grant aid agreement for maternal health [6cec0979]. The grants will fund the construction of maternal shelters, community programs, provide medical equipment, and capacity building for health workers [6cec0979]. In related news, the International Monetary Fund (IMF) has approved a loan of $941 million (about KSh 150 billion) for Kenya under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) programs [6cec0979]. The IMF will disburse $624.5 million (KSh 100.9 billion) immediately to relieve the country from its current financial struggles [6cec0979].
The Treasury has moved to unlock a Sh8.5 billion ($60 million) grant by the US government for traffic improvement projects in Nairobi, Kisumu, and Mombasa [9dbb8ec0]. Kenya is yet to tap into the grant from the United States Millennium Challenge Corporation (MCC), nearly five years after being selected as a beneficiary [9dbb8ec0]. Last week, Treasury Cabinet Secretary Njuguna Ndung’u published the Public Finance Management (Kenya Millennium Development Fund) Regulations, 2024, establishing the Kenya Millennium Development Fund to manage the funds granted as part of a $55 billion kitty to Africa [9dbb8ec0]. The projects under the MCC aim to improve transportation in the three cities, focusing on pedestrian needs, transportation options for women, and financing support for climate-friendly buses [9dbb8ec0]. This is the second phase of the programme, with the first one valued at Sh1.8 billion ($12.7 million) ending on March 24, 2027 [9dbb8ec0].
Kenya's liquidity reached a record high in December as cash outside banks surged to Sh282.1 billion. This increase was driven by the government's clearance of pending bills, injecting funds into the economy. Mobile money transactions also saw a significant uptick, with total cash movements in and out of agents reaching Sh788.35 billion. This surge highlights the growing reliance on mobile money in Kenya. The release of funds and the rise in mobile money transactions contributed to a slight improvement in business confidence, as indicated by the Stanbic Bank's Purchasing Managers' Index. The strategic clearance of pending bills and the resulting increase in cash circulation and mobile money transactions create an environment conducive to economic recovery and growth. [240320f9]
Ethiopia's biggest bank, the Commercial Bank of Ethiopia, is attempting to recover more than $40 million after a technical glitch allowed customers to withdraw more than they had in their accounts. The problem was caused by a routine system update and inspection, not a cyberattack. Half a million transactions were made during the glitch, resulting in a loss of 2.4 billion Ethiopian birr ($42 million). The bank is working with the police to recoup the lost money and will not press charges against students who took out cash that did not belong to them. [cf75eabe]