The government of Kenya is looking at a new way to deal with the rising debt crisis, and Treasury Cabinet Secretary John Mbadi has proposed swapping it for food security.
According to the Treasury’s annual borrowing plan for the 2025/2026 financial year, the government is preparing a USD 1 billion (Ksh13 trillion) Debt-for-Food Swap with the World Food Programme (WFP), potentially by March 2026.
This would be a pioneering move for Kenya, and one of the first deals of its kind globally.
“In managing external debt, the Government will prioritize non-market-based measures, including Debt Swap arrangements, which restructure existing obligations without creating new debt, thereby alleviating medium-term fiscal pressures,” Mbadi notes.
But what does it actually mean to swap debt for food security?
Also Read: Govt Issues Ksh193.5 Billion Bond in New Debt Swap Move
What it Means for Kenya to Swap Debt for Food Security
A debt swap occurs when a government strikes a deal with its creditors to restructure or reduce the debt it owes.
However, instead of paying the money back in full, it commits to using the freed-up funds for a specific purpose.
Other countries have done debt-for-nature swaps, where lenders cut interest rates or cancel part of the debt in exchange for investments in protecting forests, oceans, or biodiversity.
For Kenya, the money will be channeled towards savings into food security projects.
Mbadi explains in the report that non-market-based liability management tools, including debt swaps, help restructure obligations without creating new debt.
Therefore, it eases medium-term fiscal pressures.
Furthermore, Kenya is counting on a previous successful debt swap in 2024 as proof that it is the right decision to reduce the debt burden.
“In 2024, the Federal Republic of Germany supported a Euro 60 million Debt Swap initiative.
“Building on this success, the Government will continue to engage development partners to explore additional swaps, including a proposed USD 1 billion Debt-for-Food Swap with the World Food Programme (WFP),” adds the report.
Also Read: Kenya Successfully Pays Off Ksh116.3 Billion Eurobond Debt
Ksh193.5 Billion Bond Debt Swap
The government is also combining these non-market deals with market-based operations.
For example, in February 2024, the treasury bought back US$1.5 billion of a Eurobond due in June 2024, covering 75 percent of the maturing debt.
It eased refinancing pressure, stabilized the shilling, and reassured investors.
It also allowed the government to extend its repayment obligations by replacing the old debt with the new 2036 bond.
Additionally, the Treasury gained the flexibility to adjust the amount of old debt it buys back, thereby reducing short-term financial pressure.
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