Kenyas financial commitments and debt to foreign (foreign liabilities) countries increased by Sh1billion between 2020 and 2022, a new report by Central Bank of Kenya shows.
The total stock of foreign liabilities has shown a steady upward trend, escalating from Sh1.75 trillion at the end of 2020 to Sh2.07 trillion by the end of 2022.
Foreign liabilities refer to the obligations that a country owes to foreign entities. They indicate the level of financial exposure a country has to foreign entities, reflecting the degree of foreign investment and borrowing.
High levels of foreign liabilities can be a sign of significant foreign investment, but they can also indicate potential financial vulnerabilities if the country relies heavily on external funding.
Data by CBK revealed that European nations account for the largest share of these liabilities, contributing 38.8 per cent, 35.5per cent, and 37.1 per cent in 2020, 2021, and 2022 respectively.
“The United Kingdom was the primary contributor, making up 47.2 per cent, 49.1 per cent, and 47.2 per cent of the European liabilities during these years,” CBK said it its 2023 Foreign Investment Report.
Other significant European contributors included the Netherlands, France, Switzerland, and Jersey, whose combined liabilities rose from Sh297.8 billion in 2020 to Sh336.3 billion in 2022.
Africa remained the second-largest source of foreign liabilities throughout this period, accounting for 29.1 per cent of the total by the end of 2022.
South Africa was the leading African investor, responsible for 37.5 per cent of the continent's liabilities, which increased from Sh199.0 billion in 2020 to Sh233.8 billion in 2022.
Mauritius and the Democratic Republic of Congo also made substantial contributions, with the latter's entry into the East African Community (EAC) in late 2022 causing a notable rise in liabilities from the EAC bloc, from Sh32.9 billion in 2021 to Sh163.2 billion in 2022.
Investments from Asia also saw significant growth, rising 17.6per cent from Sh225.9 billion in 2020 to Sh265.7 billion in 2022.
India led this region, holding 43.0per cent of the liabilities in 2020 and 2021, and 42.9per cent in 2022.
The United Arab Emirates and China increased their liabilities from Sh30.1 billion and Sh15.7 billion in 2020 to Sh39.6 billion and Sh25.2 billion in 2022, respectively.
However, Japan's investment saw a decline of 13.3 per cent, from Sh49.1 billion in 2020 to Sh42.6 billion in 2022.
Despite the country having relied to the east during the review period, liabilities from America experienced a significant rise of 28.9 per cent, from Sh92.5 billion in 2020 to Sh119.2 billion in 2022.
This increase was largely driven by the United States, whose investments grew by 24.5 per cent, from Sh71.1 billion in 2020 to Sh90 billion in 2022.
Foreign liability inflows (the movement of financial resources from foreign entities into a Kenya), increased from Sh512.2 billion in 2020 to Sh622.5 billion in 2021, but declined by 14.4 per cent to Sh533 billion in 2022.
The regions with the highest inflows of foreign liabilities within the reference period were Africa and Europe, accounting for 37.8 per cent and 25.3 per cent of the total liability inflows, on average.
“Africa’s dominance was significantly boosted by the inflows from South Africa, Mauritius and Morocco, generating Sh91.6 billion, Sh32.7 billion, and Sh26.8 billion in 2022, respectively. The foreign liability inflows from International Financial Institutions/Organizations recorded a 3.5 per cent increase from Sh41.8 billion in 2020 to Sh43.3 billion in 2022,” CBK said.