World Bank raises red flag over Kenya’s debt rollovers, warns of costly risks for Africa

The World Bank has cautioned African nations, including Kenya, against relying heavily on debt rollovers, warning that the practice could push countries into distress.

In its latest Country Policy and Institutional Assessment report for Sub-Saharan Africa, the lender highlighted Kenya’s repayment of the Ksh254 billion Eurobond last year as a prime example. While the government successfully bought back the maturing debt, the move was financed through a new Eurobond at a significantly higher interest rate, roughly 400 basis points above the earlier facility.

The World Bank noted that while such rollovers help calm markets, they expose countries to costly repayments in tight global credit conditions.

“Large maturity payments increase the risk of having to roll over debt in tight credit conditions and can test liquidity levels of public markets, thereby making debt service especially expensive,” the report stated.

The lender also cited the Democratic Republic of Congo’s repeated defaults as a stark reminder of the penalties and higher interest rates that come with late servicing.

Closer home, the World Bank further warned of vulnerabilities in Kenya’s banking sector, flagging rising non-performing loans as a growing concern that could weaken capital buffers and strain financial stability.