Debt servicing to take up 66% of Kenyans’ Ksh.1.7 trillion in taxes
Kenya’s public debt has ballooned to Ksh.8.4 trillion record high as President Uhuru Kenyatta prepares to vacate office in August, representing a 344.4 percent jump from Ksh.1.89 trillion debt which was left behind by the late President Mwai Kibaki in 2013.
The National Treasury Cabinet Secretary Ukur Yatani has put debt servicing costs at Ksh.1.5 trillion.
This represents 66 percent of Ksh.1.77 trillion the Kenya Revenue Authority (KRA) has been tasked to collect by June 30, 2022.
Out of the Ksh.8.4 trillion debts, Kenya owes foreign creditors Ksh.4.21 trillion compared to Ksh.4.19 trillion owed to domestic creditors.
In his Madaraka Day speech on June 1, President Kenyatta defended his borrowing habit, saying it was necessary to fund infrastructure and accelerate economic growth.
“I want to pose a National Question: How much is ‘too much’ borrowing? When does borrowing become ‘too much’ and unbearable to a nation?” asked the President.
Together with his Deputy William Ruto after clinching the presidency in 2013 relied on loans to build roads, bridges, power plants and railway lines.
“And if we can transport 10 times more passengers with SGR at half the price and half the time and move 3 times more cargo daily from Mombasa to our neighbours, then our borrowing has surely been worthwhile and paid tangible dividends,” said the President.
For close to a decade now, China has been the biggest financier accounting for 67 percent of Kenya’s total external debt, mainly infrastructure financing including the Ksh.477 billion Standard Gauge Railway (SGR) loan.
Kenya owed China Ksh.799.25 billion ($6.95 billion) as of December last year compared to Ksh.162.3 billion ($1.42 billion) owed to Japan same period, making Japan the second-biggest creditor, according to National Treasury.
Another major lenders are France which accounts for seven percent of foreign loans.
But Japan has leapfrogged President Xi Jing Pin to become the country’s biggest creditor based on how Kenya intends to receive credit for the FY 2022/23.
In his manifesto released on June 6, Azimio Presidential flag bearer Raila Odinga hinted at negotiating terms for debt repayment to fund his ambitious ten-point agenda, but it will be a long road home.
“We will ensure that all debts are procured only for purpose of viable projects that will finance the repayments and debt servicing and secure inter-generational equity,” said Odinga.
Experts who welcomed his terms, however, argued otherwise.
“The restructuring talks will be difficult to execute and also dependent on the creditor type. The window for wholesale relief for a middle-income country such as Kenya won’t fly with some creditors,” said Churchill Ogutu who spoke to Business Daily.
Should Odinga or his main competitor Ruto clinch the seat, will require an average of Ksh.3.74 billion daily to repay the country’s debts.