The National Treasury borrowed Ksh. 3.385 billion daily between January 2020 and January 2021, new data released by the Central Bank of Kenya (CBK) now shows.
This is after the CBK revealed that Kenya’s level of public debt rose to Ksh.7.35 trillion in January, denoting a 20 percent year-on-year growth in the country’s level of public debt over that 12-month period.
External debt accounted for 52 percent of Kenya’s public debt at Ksh.3.819 trillion, with domestic debt – which is debt taken out through Treasury bills and bonds, accounting for the remaining 48 percent at Ksh.3.532 trillion.
The revelation comes nearly three months after Parliamentary Budget Office (PBO) projected that Kenya’s public debt could top Ksh. 7.8 trillion by June, accounting for 69 percent of Kenya’s Gross Domestic Product (GDP) and 87 percent of the total debt ceiling, which is capped at Ksh. 9 trillion.
“Indeed, the debt stock is projected to double by June 2030 and could account for over 100 percent of GDP”, the advisory body warned.
In a report released in January, the PBO indicated that the cost of servicing Kenya’s public debt in terms of debt principal and interest payments would cross the Ksh. 1 trillion mark in 2021/2022 Financial Year (FY) and would be domestically driven.
According to the report’s projections, debt repayment expenditure, estimated at Ksh. 925 billion in the current 2020/2021 FY, will reach Ksh. 1.023 trillion by the end of June 2022.
“To manage this situation, lengthening the maturity of existing securities may be necessary even though this will transfer debt to future generations,” the report advised.
The 2020/2021 half-year Budget Implementation Review by the Controller of Budget (CoB), Dr. Margaret Nyakango also gave a similar warning after it emerged that Kenya borrowed Ksh.1.23 trillion between December 30, 2019 and December 30, 2020, pushing the country’s debt to Ksh.7.28 trillion from Ksh.6.05 trillion – an increase of 20.5 percent in a span of one year.
“Increased public borrowing may result in undesirable fiscal consequences such as high-interest rates, inflation and overburdening of future generations,” Nyakango warned in the report.
The rising public debt trend has caused political uproar across different political divides who have castigated the government’s appetite for debt since the Jubilee administration took office in 2013.
Deputy President, Dr. William Ruto is among those who have publicly spoken out on the country’s public debt.
On February 22, DP Ruto took a swipe at the government’s heavy borrowing, warning that the appetite for loans to finance development projects is hurting the economy.
“Katika Kenya yetu kufikia sasa hata mtoto hajazaliwa yuko na deni ya Kenya,” said DP Ruto. (Which translated means “At this point in our country, even a child who is yet to be born bears part of Kenya’s debt burden.”)
Kenya’s rising stock of debt has been largely driven by the widening gap between the Government’s revenue collection and its growing expenditure requirements, particularly in the wake of the COVID-19 pandemic.
According to the draft 2021 Budget Policy Statement, the fiscal deficit is projected at Ksh. 937.6 billion in FY 2021/22.
The fiscal deficit will be financed by net external financing of Ksh.345.5 billion and net domestic borrowing of Ksh.592.2 billion.
The release of the new data comes at a time when the National Treasury is seeking to reduce the country’s exposure to external debt under the 2021 Budget Policy Statement (BPS).
The 2021 Medium Term Debt Management Strategy proposes a borrowing in the ratio of 21:79 for net external and domestic borrowing in FY 2021/22 and an average ratio of 30:70 for the medium term.
