June 21, 2024

The US and Kenya are demanding more support for developing countries

US President Joe Biden and Kenyan President William Ruto on Thursday called for more support for developing countries like Kenya.

Biden and Ruto, who were on a three-day state visit to the United States, unveiled a “Nairobi-Washington Vision” that lays out detailed steps to tackle the massive debt burdens of many low-income countries, half of which are at or near annual debt.

Many countries now use a large portion of their income to repay debt, limiting their ability to invest in development projects or the climate.

“Countries ready for ambitious reforms and high-quality programs to invest in sustainable development and address global challenges such as climate change, epidemics and health threats, fragility and conflict must be supported by the international community and not abandoned,” the Nairobi-Washington Vision states.

“High ambition countries” should receive financial assistance from international financial institutions, and creditor countries should be given preferential treatment.

China, the United States and the Group of 20 creditor nations have launched a common framework for debt restructuring to help countries facing heavy debt burdens during the pandemic, but the initiative is long overdue.

A senior US Treasury official said China – the largest official creditor – has taken some steps to help indebted countries, but more work is needed.

The United States and Kenya, along with international financial institutions, China and other official bilateral lenders, and the private sector must make a major push to ensure that debtor countries do not spend their money on old debts.

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“We cannot allow official lenders to trample other parts of the system,” said a senior Treasury official.

Ruto told Reuters last month that Kenya expects a new $1 billion disbursement from the International Monetary Fund this month. Chinese loans to Kenya increased between 2013 and 2022 and now account for about 64% of Kenya’s current bilateral external debt.

Commercial external borrowings have also contributed to Kenya’s external debt problem, with a $2 billion Eurobond due in June 2024 at the fore.

The United States this week provided $250 million in new funding for crisis relief through the World Bank’s International Development Agency and is working with Congress to provide $21 billion to the IMF’s Poverty Reduction and Development Fund, officials said. He is also urging Congress to authorize $36 billion for the World Bank.

Washington said it would work with other advanced economies in the Group of Seven and Group of Twenty to push for more private investment, integrated aid packages and reforms to international financial institutions.

“It’s not just about China. … The system needs to work better,” the Treasury official said.