Kenya’s public debt is sustainable, says World Bank official

Kenya’s public debt is sustainable relative to the total size and productivity of the economy, World Bank Kenya office lead economist Wolfgang Fengler has said.

Central Bank of Kenya (CBK) data shows that as at November 2012, the total public debt stood at Sh1.783 trillion, which amounted to 46.1 per cent of the nominal gross domestic product (GDP).

Latest figures released by the Budget Controller’s office show that the Treasury has fallen behind repayment of public debt by Sh32.6 billion, but Mr Fengler said there was no cause for alarm.

“Kenya’s debt is in good shape and the macroeconomic fundamentals are strong. It is nowhere near the situation in Europe where public debt is very high,” said Mr Fengler on Thursday in Nairobi.

Kenya’s GDP as at end of November was estimated at Sh3.87 trillion, in a year when economic growth was estimated at 4.7 per cent.

(Read: Kenya's GDP grew 4.7pc in 2012: Treasury)

For global comparisons, Mr Fengler said, Kenya’s debt would place the country third among the least indebted countries in Europe — after Luxemborg and Estonia.

Currently, many European countries are facing a sovereign debt crisis which, in some cases, has precipitated economic recessions.

The country is able to meet 90 per cent of its financing needs, the World Bank official said, adding that the rest is foreign-financed; five per cent in the national Budget while the other portion of funds goes to projects outside the Budget — channelled mainly through non-governmental organisations.

Mr Fengler was speaking at the launch of the Strategy for Public Finance Management Reforms in Kenya 2013-2018 at the Kenyatta International Conference Centre, Nairobi.

The strategy document details spending of just over Sh20 billion on public finance reforms including the cost of a head-count and auditing of the payroll of national government, local authorities, the Teachers Service Commission, pensions as well as parastatals.

(Read: Treasury launches Sh20bn purge on ghost employees)

The strategy document, launched by Finance minister Njeru Githae, will also include digitisatising personnel and payroll records, linking up with the Registrar of Persons records, installing and initialisation of the Integrated Financial Management Information System (IFMIS) in all government ministries, departments and agencies.

Mr Fengler lauded the macro-economic reforms that have been carried out in the past 10 years, including in the financial sector. Finance permanent secretary Joseph Kinyua said there had been a misunderstanding on Kenya’s debt levels.

“Nobody seems to believe us when we say that our debt levels are sustainable. We are like Jesus who never got any respect in his homeland,” said Mr Kinyua.

The IMF has maintained the same position as the World Bank, adding that Kenya has room for more debt and can issue a Eurobond of up to Sh65 billion in the 2013/14 financial year.

Mr Geoffrey Mwau, the economic secretary at the Treasury, said that though the document was just being launched, some of the envisaged reforms had already begun.