China is one of the biggest lenders to African countries, accounting for 12% (KSh 94 trillion) of the continent’s external debt Due to the extent of Chinese lending, the World Bank noted that seven African nations were either in debt distress or at risk of debt distress FX Pesa market analyst Rufas Kamau explained that when the US Fed Reserve raises interest rates, obligations grow because countries use weak local currencies to acquire a strong dollar

He explained that obligations grow when the US Federal Reserve raises interest rates because the countries use their weak local currencies to acquire a strong dollar. “Kenya, like many other economies in the global south, has debts in US dollars. When the Federal Reserve raises interest rates, Kenya’s obligations grow larger because it must spend more shillings to acquire an appreciating dollar and then use it to repay loans. The risk of these countries defaulting on their bonds is thus elevated, resulting in a flow of cash away from the frontier and emerging economies and toward developed ones,” Kamau told TUKO.co.ke.