Kenya’s public debt threatens the health of its economy, says African Economic Outlook 2019.
At 57 per cent to the country’s GDP, Kenya crossed the Ksh5 trillion credit in June 2018, a 14 per cent increase compared to the same period the previous year.
“The share of loans from non-concessional sources has increased, partly because Kenya issued a $2 billion Eurobond in February 2018” says AfDB’s economic outlook, adding that “half of public debt is external.”
Kenya has yet to slow its appetite for external loans. Economists and market analysts question the country’s ability to manage its stratospheric debt burden. The National Treasury, on the other hand, maintains that the credit load is manageable.
Last year, Treasury said that it was in talks with the international investors Kenya owes money to ensure that impending debt obligations are managed efficiently without subjecting the country’s coffers to liquity pressures.
Treasury’s argument was further compounded in October 2018 when International Monetary Fund’s debt sustainability analysis elevated the country’s risk of debt stress to moderate.
AfDB also noted that CBK has been foremost to stimulate growth when it reduced the interest rate to 9 percent in July 2018 from 9.5 percent in May.
Restraining public borrowing requires proper mobilisation of domestic resources, austerity measures, prudent monetary policy and ruthless graft purge.
“A tighter fiscal stance reduced the fiscal deficit to an estimated 6.7% of GDP in 2018, with the share of government spending in GDP falling to 23.9% from 28.0% in 2017.
“The government plans to continue fiscal consolidation to restrain the rising deficit and stabilise public debt by enhancing revenue, rationalising expenditures through zero base budgeting, and reducing the cost of debt by diversifying funding sources,” said the report.
