The International Monetary Fund (IMF) maintains Kenya is among countries with a high risk of debt default, even as the National Treasury puts up a brave face.
In its latest Global Financial Stability Report, the lender says at least 60 per cent of low-income countries are in debt distress with some already in default.
According to IMF, Belarus, Sri Lanka, Suriname and Zambia have already defaulted.
Kenya is rated among countries with a high default risk, a situation that ties in with the positions taken by several credit rating firms including Fitch and Moody's that downgraded the country's creditworthiness mid-this year.
They said Kenya's debt default risk remains high and could worsen due to uncertainties in the global economy.
In no particular order, the global lender rates 23 countries out of 50 sub-Saharan African states to be in debt distress or at high risk of debt distress, which is up from just eight countries in 2015.
While Moody's downgraded the country's creditworthiness to B with a negative outlook, Fitch maintained the country's debt profile at B+ a negative outlook.
This is an indication that Kenya might miss a repayment or become errant on loan obligations.
Yesterday, the National Treasury took issue with report in the Business Daily indicating the country had defaulted on a Chinese loan for the construction of the Standard Gauge Railway (SGR).
''Kenya has never defaulted on its debt service obligation to China and other creditors, '' Cabinet Secretary Ukur Yatani said in a statement.
Although both IMF and World Bank have raised a red alert on the country's debt plan, the lenders are confident that Kenya could avert a possible default if it reorganises its fiscal plan.
In June last year, the World Bank Group said it is likely to remove Kenya from countries with a high risk of default on loans in 2028 if the authorities stick to a programme aimed to curtail growth in government expenditure and growing taxes.
The multilateral lender says it expects the country’s debt risk profile to improve in coming years on projected recovery in economic growth and exports, helped by the fiscal consolidation programme and implementation of policy reforms
William Ruto's administration has vowed to cut the country's debt stock which currently sits at Sh8.6 trillion.
In his maiden address to the National Assembly, Ruto slashed the country's budget by Sh300 billion in order to cut dependency on loans to run the government.
In emerging markets, rising rates, worsening fundamentals, and large outflows have considerably pushed up borrowing costs.
The impact has been especially severe for more vulnerable economies, with 20 countries either in default or trading at distressed levels.
''Unless market conditions improve, there is a risk of further sovereign defaults in frontier markets. Large emerging market issuers with stronger fundamentals, by contrast, have proved resilient thus far,'' IMF said.
In the next five year years, sub-Saharan African countries are due to make $21.5 billion in repayments of Eurobonds, excluding the cost of servicing these foreign currency-denominated loans.
This record amount of external bond repayments comes at the same time as more African sovereigns fall into debt distress.
Early this month, World Bank president , David Malpass, said that he now feared a “fifth wave of debt crisis”
This is a period when a state no longer has the means to repay its public debt or, more broadly, where creditors refuse to grant new loans to the government.
The same observation was made by the IMF which underlines in its annual report, published on Tuesday, October 11, that poor countries are particularly affected.
Global stress tests for banks show that, under a severe downturn scenario, up to 29 per cent of emerging market bank assets could breach minimum capital requirements; in advanced economies, most banks would remain resilient.
Corporate credit is also facing an increased risk of default, with sub-investment-grade firms more exposed to a turn in the credit cycle and deteriorating investor risk appetite.
''Central banks must act resolutely to bring inflation back to target, to keep inflationary pressures from becoming entrenched, and to avoid de-anchoring of inflation expectations that would damage credibility,'' IMF says in the report.
It adds that high uncertainty clouding the outlook hampers policymakers’ ability to provide explicit and precise guidance about the future path of monetary policy.