Kenyan presidential adviser dismisses default rumors as cash crunch delays salaries

The Chief Economic Adviser of 's President, David Ndii, has dismissed rumours of a possible default, stating that the country will not default on its debt repayment obligations, despite the government delaying payment of civil service salaries due to a cash squeeze caused by massive interest payments.

Ndii confirmed that the government was facing liquidity challenges, but also stated that the country can finance repayments, calling default a “very bad idea” since it would force the government to “spend the next three to four years in very protracted debt restructuring negotiations.”

The debt burden, compounded by a weakening local currency and international market turmoil precipitated by a banking crisis, has caused some market participants to speculate that Kenya could soon default like and Ghana.

However, Ndii affirmed that default is not on the cards for Kenya, adding that the government is capable of making significant sacrifices to meet its financial obligations.

“The government may face financial difficulties, but we are not insolvent. We can finance repayments. It is a significant sacrifice but we are actually able to pay,” Ndii told Citizen TV on Monday.

Kenya's debt has ballooned in recent years, with interest payments on the domestic debt alone soaring to 680 billion shillings ($5.09 billion) this year from 180 billion shillings nearly a decade ago when the debt binge started, according to Ndii.

The delay in civil servant salaries drew the ire of the opposition in the national assembly, with Opiyo Wandayi, the leader of the opposition, accusing the government of failing in one of its most basic obligations.

“Civil servants and MPs have gone to Easter without salaries,” he said in a statement issued during the weekend.

Lawmakers had not received their March salary by April 7, a delay from the usual payment time of before March 26-30.

Ndii attributed the delays to the liquidity challenges posed by the rising repayment of debts.

The Finance Minister, Njuguna Ndung'u, did not respond immediately to a request for comment.

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