The financial crisis in Kenya has deepened after joining the list of countries in the world with increasing investor anxiety.
According to a report by Bloomberg, Kenya’s credit-default swaps (CDS) has recorded a sharp increase in the past one month, coming second after Argentina worldwide.
CDSs are financial instruments that act like insurance for investors. If a borrower defaults on debt obligations, the CDS holder receives compensation to cover their losses.
The increase in Kenya’s CDSs mean that investors have lost confidence in the country, especially after the anti-Finance Bill protests witnessed in the country.
Moreover, the cost of insuring the country’s debt against default is around 551 basis points, the highest since February 13 and up from around 387 basis points a month ago.
Also Read: Ruto Withdraws Finance Bill 2024, Gives Way Forward
Ruto Speaks to IMF After Finance Bill Protests
Argentina’s credit-default swaps (CDS) rates are often used as a benchmark for assessing sovereign risk globally because of the country’s history of economic volatility and debt defaults.
When CDS rates rise to the levels of a country like Argentina, like in Kenya’s case, it often reflects bigger concerns about economic stability and debt repayment capacity.
Following the withdrawal of the Finance Bill 2024, President William Ruto spoke to the International Monetary Fund (IMF) Chief Kristalina Georgieva.
The finance bill, which was rejected by Kenyans, contained tax increments that were central to policy reforms agreed between the country and the IMF as part of a lending program worth Ksh459.9 billion ($3.6 billion).
According to Reuters, major donors have agreed that the IMF should demonstrate flexibility towards the program targets, given the need to address the funding gap resulting from the withdrawal of the bill.
One of the diplomats said the government should show a commitment to reducing wasteful spending, cracking down on corruption and increasing accountability in exchange for that flexibility.
“We remain deeply concerned by the recent tragic events in Kenya and maintain close ongoing and constructive dialogue with the Kenyan authorities,” an IMF spokesperson said when asked about the call.
Also Read: Ruto Approves 5 Bill Policies During Cabinet Meeting
Anti Finance Bill Protests in Kenya
On June 26, the Head of State proposed budget cuts in the Office of the President and the renovations that had earlier been budgeted for, while withdrawing the bill.
The move came after days of nationwide protests, with Kenyans from various walks of life rejecting the proposals in the bill which had already been passed by members of parliament.
The Head of State noted that despite the good will of the government and the need to solve different issues that Kenyans are facing including the need for healthcare and development, he had to listen to the cries of Kenyans.
“Listening keenly to the people of Kenya who have said loudly they want nothing to do with the finance bill 2024, I concede and therefore will not sign the bill, and it shall therefore be withdrawn. I have agreed with MP’s that it becomes our collective position”
Subsequently, Ruto has invited Kenyan Gen Zs for a discussion on a way forward after the violent protests. The meeting will be hosted on X Space.
“All Kenyans are welcome to contribute to this dialogue as part of our collective effort to foster national renewal and create a better Kenya for all,” a dispatch from the Cabinet Office, Executive Office of the President said.
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