Kenya is banking on a concessional borrowing from potential creditors to help itself re-profile its liabilities including swap of expensive loans.
In what appeared as blacklisting of expensive creditors, President William Ruto said Friday that he is not interested in a market that would offer Kenya credit at more than 10 percent.
“We will go to the market and if cannot find money at 10 percent, we will go back and look for other sources, “ said Ruto in new directive to Treasury Cabinet Secretary Professor Njuguna Ndugu, adding that “it’s not possible for us to borrow at beyond 10 percent.”
Kenya, in the past administration, has been going for markets with facilities of up to 12 to 14 percent interest rate.
The President is pushing to narrow public debt, currently at Ksh.8.5 trillion accrued over the past ten years.
The move will require serious austerity measures, including freezing on spending among state officers and corporations.
“I will not be the President who will continue the journey of taking our country into debt. It’s going to be a difficult choice but I don’t see an option. We have to make those choices.”
He defended his early directive for all ministries to shelve their budget and save at least Ksh.300 billion from the current national budget to ease debt repayment pressure.
He said that his government will never borrow to finance recurrent expenditure – “the market cannot sustain the kind of borrowing we are doing as a government”.
The Ksh.300 billion slash will revise the 2022/23 budget by 9 percent to Ksh.3.01 trillion from Ksh.3.31 trillion.
Ruto’s directive comes a day after CS Ndungu said he would soon go for a new loan from the World Bank Development Policy Operations (DPO) to help revive the ailing economy.
“We will have an enhancement with the World Bank. It is one of the support areas for our recovery and it is targeting some of the areas we are looking at, for instance, the hunger safety net,” said Prof. Ndung’u.
The new facility, even though undisclosed, is expected to meet external financing needs to address ongoing shocks including a severe drought and access to the international capital markets.
Kenya’s DPOs financing since 2019 to 2022 amounts to a total of Ksh.395.6 billion
Two days prior, Prof. Ndungu’s entered into a preliminary deal with the International Monetary Fund (IMF) for a Ksh.52.7 billion.
The loan is expected in the government’s coffer in the coming weeks with a 38-month repayment plan attached to it.
Kenya’s debt hit Ksh.8.5 trillion from both foreign and domestic borrowing, with the President optimistic that in the third year of his reign, he would have narrowed the burden to ensure an existing recurrent budget surplus.
“Over the next three years, we must reverse this and go back to the situation where government contributes to the national savings effort by keeping recurrent expenditure below revenue.”
