East African economies struggle with rising debt amid weak currencies

Before the Covid-19 Pandemic struck, East African countries had a common agenda to invest in infrastructure development. As the three main economies of Kenya, Tanzania and Uganda they sought to become competitive and attractive investment destinations, the issue of borrowing in foreign currencies created the debt burden they face today. The mega investments in roads, railways, ports and aviation, have all been challenges, as low revenue collections and high recurrent expenditures continue to plague their respective governments. Most of the countries have no choice but borrow to bridge budget deficits. According to the IMF, the major EAC nations, namely Kenya, Uganda, Tanzania, Burundi and Rwanda, together, had borrowed more than $100 billion in both external and domestic borrowing. With the global economy in teeters post Covid-19 and the impact of the Ukraine-Russia conflict, economies worldwide are contracting, leaving East African nations in a perilous situation. According to the IMF, about 60 percent of countries eligible for the Debt ServiceSuspension are at high risk of debt distress or already in debt distress (DSSI). This is when a country has started, or is about to start a debt restructuring, or when a country is accumulating arrears. In East Africa, the three main