Kenya is now Ksh.1 trillion shy to hit the Ksh.9.1 trillion debt ceiling with President Uhuru Kenyatta remaining with only five months in office.
This would prove it tough for the incoming administration to create room for borrowing to fund state projects in the wake of ballooning debt since the Jubilee administration assumed power in 2013.
In a report by The Star, the MPs are now proposing to shoot the debt ceiling to Ksh.12 trillion to create room for borrowing.
This saw Majority Leader Amos Kimunya earlier last week pushing an amendment to the 2022/23 Budget Policy Statement (PBS) directing the Treasury to amend the law to accommodate the huge budget deficit
“We are looking at Sh12 trillion but Sh15 trillion on a long-term basis to avoid constant reviews. We are also looking at Public-Private Partnerships options to limit borrowing,” said the official who spoke to The Star.
The latest National Treasury debt registry shows the country’s gross public debt stood at Ksh.8.2 trillion by last December while the total external loan was Ksh.4.174 trillion with multilateral loans standing at Ksh.1.782 trillion, commercial Ksh.1.208 trillion and bilateral Sh1.17 trillion
External Debt Service to Revenues ratio
By September 15, 2021, Kenya’s external debt service to revenues ratio declined from 20.8 percent in June 2000 to 4.3 percent in June 2013, then rose to a high of 21.4 percent in June 2019.
The high ratio in June 2019 was mainly on account of a one-off USD 750 million Eurobond repayment.
The ratio has been declining in the last 2 years also due to an improvement of the terms on new external loans.
Total debt service to revenues increased to 57 percent in 2019 from 17 percent in 2012 due an increased debt stock and changing terms on new loans including one-off repayment of syndicated loans and Eurobonds in 2019.
This trend is expected to reverse in the medium term due to improving terms on new loans, and the restructuring of external commercial loans that have heavy maturities and high interest cost.
When Kenya secured a Ksh.352,01 billion (US$.3.2 billion) loan from China in 2014 to construct the Standard Gauge Railway (SGR) connecting Nairobi and the port city of Mombasa, critics termed the project costly and worried about its debt burden on Kenya.
Seven years on now, the Central Bank of Kenya (CBK) Governor Dr. Patrick Njoroge has made it clear that the project has indeed pushed up the country’s debt burden.
Appearing before the Senate Committee on Finance and Budget last year, Dr. Njoroge noted that the SGR debt is around 11 percent of Kenya’s external debt.
The CBK Governor revealed that they were not involved in the SGR debt discussion.
“We were not involved in the SGR discussions,” said Dr. Njoroge.
“Even though the debt level is rising we should be able to manage it…we should accept that it is an individual decision,” CBK Governor Patrick Njoroge said.
There’s also the question of whether Kenya will be able to repay the Chinese loans which have topped Ksh.517,06 billion (US$4.7 billion) after the line was expanded in 2015 for another Ksh.165,04 (US$.1.5 billion) by 75 miles to Naivasha.
