Kenya’s public debt surpassed the Sh5 trillion mark in June because of the government’s continued borrowing according to the National Treasury’s most recent quarterly report. External debt currently stands at Sh2.563 trillion while domestic borrowing is at Sh2.448 trillion.
The report notes that country’s debt in the same period a year ago was at Sh 4.41 trillion. During the 2017/18 period, the govt borrowed Sh 632 billion to bring the total debt upto June 2018 to Sh5.011 trillion, which is 58 per cent of the country’s GDP. International lenders such as the International Monetary Fund (IMF) and China accounted for a bigger chunk of the loans.
World Bank’s total lending to Kenya now stands at Sh 581 billion while China’s is at Sh 557 billion.
The rising cost of the debt has been a public concern as global analysts such as the Institute of Chartered Accountants in England and Wales (ICAEW) warn that it could stall the country’s economic recovery. In June this year, Kenya’s debt standing was ranked the fifth highest in Africa after Mozambique, Egypt, Ghana, and Gabon.
“The pace of public debt accumulation and the lack of a clear communication strategy regarding the government’s plan to address deficits have raised concerns about the sustainability of Kenya’s public finances,” the ICAEW report stated.
China is one of Kenya’s biggest lenders with the largest portion of the bilateral debt being used to finance the standard gauge railway. Other external lenders include the World Bank and the Africa Development Bank that have given the country about Sh2.7 trillion. On the other hand, domestic lenders such as pension funds and commercial banks have given the country a total of about Sh2.5 trillion.
At the end of June, the World Bank’s total lending amounted to Sh581 billion compared to China’s which stood at Sh557 billion during the same period. The former’s debt could rise further as Kenya seeks another Sh380 billion to fund Phase 2B of the SGR between Naivasha and Kisumu.
Kenya’s top two bilateral lenders are Japan and France that are owed Sh101 billion and Sh61 billion respectively.
Managing the Debt
According to the programmes officer at the Institute of Economic Affairs John Mutua, Kenya should reduce its exposure to the commercial debt market and focus on cheaper multilateral debt.
“Carrying more commercial debt means interest payment will soon become our biggest challenge in public debt management. Kenya’s official policy is to go for concessional loans, but we haven’t managed that very well,” he said.