Kenya, U.S agency to proceed with Ksh.129 billion debt-for-food swap

The U.S. International Development Finance Corporation has agreed to proceed with a $1 billion (Ksh.129.3 billion) debt-for-food security swap with Kenya to replace costly debt with lower-cost financing, Kenyan President William Ruto said.

The East African country, which is laden with high public debt and repayments, has been seeking new sources of financing to create room for development spending and investments in infrastructure.

Ruto, who is in Washington to witness the signing of a U.S.-brokered accord between the Democratic Republic of Congo and Rwanda, said the DFC will increase its engagement with Nairobi, including sending a representative to be based in the country from next year.

“We also appreciate DFC for agreeing to proceed with the $1 billion debt-for-food security swap,” the president said in a post on X late on Wednesday.

The plan is expected to work in a similar way as so-called debt-for-nature swaps carried out by several countries in recent years that offered lower interest rates in exchange for nature protection.

A debt-for-food swap would allow Kenya to replace costly existing debt with lower-cost financing on condition it channelled the savings towards programmes to boost food security.

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.