Treasury CS Nominee Njuguna Ndungu outlines ways to shrink ballooning debt
Njuguna Ndungu, the Treasury Cabinet Secretary Nominee outlined ways through which he will help shrink the ballooning domestic debt.
According to Ndingu, he would explore concessional loan to offset the expensive domestic debt.
Many of Kenya’s debts are commercial and have turned out expensive to repay at a time when the economic is still reeling from the coronavirus shocks.
“The best way to deal with the prevalent shocks would be to look for concessional financing that would retire most of the debt especially domestic which is very expensive and taking a large proportion of recurrent expenditure,” he said.
He appeared before the National Assembly on Tuesday for the vetting exercise which entered second day. The process kicked off on Monday, October 17 and is expected to last on Friday, October 21, 2022.
Ndungu’s proposal would see the country go for cheap financing of loans from multilateral lenders such as the World Bank and the International Monetary Fund (IMF).
Domestic interest costs for the 2021-22 financial year stood at Ksh.456.8 billion or 79.1 per cent of total interest costs in the period with foreign interest costs sitting at a lower Ksh.120.8 billion – According to the National Treasury.
The domestic interest costs represented an estimated 21.9 per cent of total recurrent expenditure for the period.
Domestic debt is set to remain a burden on the exchequer in the current financial year with internal debt redemptions/roll-overs in the financial year to June 2023 estimated at Ksh.461.4 billion.
Data from the Central Bank of Kenya (CBK) shows that total domestic debt stood at Ksh.4.37 trillion as of October 7. This represent about half of Kenya’s total debt portfolio as of June 2022.
The domestic debt portfolio comprises of Treasury bonds worth Ksh.3.6 trillion covering 83.3 per cent of total domestic credit, Ksh.670.2 billion in Treasury bills and a Ksh.29.7 billion overdrafts from the CBK.
Njuguna is the former CBK Governor with whom the president will trust to steer the economy forward.