Kenya is grappling with economic challenges that have led the government to contemplate drastic measures to boost revenue collection and alleviate the national debt burden.
David Ndii, chief economic advisor to President William Ruto, revealed that the country’s debt-service costs have swallowed Ksh.150 billion of the nation’s tax income for the fiscal year ending in June. This substantial cost is attributed to factors such as prevailing interest rates and exchange rate movements.
The government anticipates that if these rates persist in their upward trend, debt-service costs could hit Ksh.200 billion.
At the 2024 Macroeconomic Outlook unveiling by NCBA Bank, Ndii disclosed the government’s strategy of targeting sectors with excess capacity that do not require additional capital infusion, with tourism being a key example.
The government is also refocusing on the agricultural sector, viewing it as a strategic area for economic growth that is less reliant on extensive financial resources.
“What farmers need is access to inputs. As I say Ksh.6 Billion is able to get you Ksh.15 Million bags of maize but if you try to put this in manufacturing by the time you start expanding your plant and all manner of things and probably get your products to market it’s sort of two or three years down the road,” said Ndii.
These proposed fiscal measures form part of the government’s wider strategy to ensure sustainable economic development and stability amidst rising debt and economic challenges.
Kenya is striving to balance between servicing its debts and fostering growth in sectors capable of driving the country’s financial recovery.
In the face of an impending Eurobond maturity, Kenya is taking proactive steps to address its upcoming debt obligations, with the $2 billion Eurobond set to mature in June 2024.
Ndii acknowledged the complexities of this situation and expressed gratitude for the International Monetary Fund (IMF) stepping in to prevent a potential default.
The IMF has offered crucial support by approving the ability to supplement Kenya’s program with up to $650.0 million.
As Kenya navigates its debt management and economic stabilization, it is crucial for the government to implement effective strategies that will ensure fiscal resilience and long-term sustainability.
The collaboration between the IMF and the Kenyan government underscores the importance of international cooperation in addressing global economic uncertainties.