In December, Kenya’s public debt surpassed KES 9 trillion ($72 billion) for the first time, bringing the country closer to reaching the KES 10 trillion ($80 billion) limit set by Parliament in June 2022.
Data from the Central Bank of Kenya (CBK) shows public debt hit KES 9.145 trillion ($73 billion) in December, made up of KES 4.472 trillion ($36 billion) in domestic debt, KES 37.88 billion ($303 million) publicly-guaranteed debt and KES 4.673 trillion ($37 billion) in external debt.
The debt is poised to get past the KES 9.44 trillion ($75 billion) mark by June, according to earlier estimates by the Parliamentary Budget Office (PBO), which will be just KES 560 billion ($4.5 billion) shy of hitting the ceiling.
This comes at a time when the weak Kenyan shilling has piled pressure on the country’s external debt repayments, with some 69.3 per cent of foreign debt denominated in US dollars.
The National Assembly in June last year increased the public debt limit to KES 10 trillion ($80 billion) to allow the government to borrow KES 846 billion ($6.8 billion) to plug the budget deficit in the 2022/23 financial year.
President William Ruto is facing a fiscal deficit of KES 695.2 billion ($5.6 billion) in his first budget of KES 3.641 trillion ($29.1 billion) for 2023/24, which will force Parliament to raise the debt ceiling for the second year running to keep borrowing within the law.
The government said it plans to plug the budget deficit in the next financial year through external loans of KES 198.6 billion ($1.6 billion) and KES 496.6 billion ($4 billion) domestic loans.
Moreover, the government also added it is forging ahead with plans to replace the nominal debt ceiling with a debt anchor expressed in present value terms as a ratio of the gross domestic product.
Treasury told the International Monetary Fund in December that the new framework will “strengthen the credibility of the government’s strategy to reduce debt vulnerabilities by enhancing transparency and accountability around the envisaged path to reach the medium-term anchor”.