Kenya Plans Pioneering $1 Billion ‘Debt-for-Food’ Swap

Kenya aims to carry out a pioneering $1 billion debt-for-food security swap by March next year, a finance ministry document showed on Tuesday, as the country looks to novel solutions to ease its hefty debt burden.

A debt-for-food swap would likely allow a country to replace costly existing debt with lower-cost financing on condition it channelled the savings towards programmes to boost food security, finance experts say.

Officials at the Finance Ministry could not be reached for comment, but Finance Minister John Mbadi told a local television station earlier this year the government was in advanced discussions on a swap involving the World Food Programme’s participation.

President William Ruto’s government spends roughly one-third of its revenue on interest payments – one of the highest ratios in the world – and is eager to bring debt spending down.

Debt swap agreements with a focus on social or environmental benefits are becoming an increasingly popular financing tool in poorer parts of the world. Countries including Ecuador, Belize and Gabon have undertaken debt-for-nature deals in recent years.

Kenya, which is East Africa’s biggest economy, had a total public debt equivalent to 67.8% of its GDP at the end of June this year, the Finance Ministry said in the document, which is called an annual borrowing plan.

The government also plans to borrow $500 million using sustainability-linked bonds by March 2026, a World Bank loan of $757 million by March next year and another loan of $457 million in June, the document showed.