Kenya’s debt payments for the year to June were eight times more than what Treasury used for roads, underlining the burden of increased government borrowing.
The Treasury data shows that it paid Sh421.8 billion for loans in the year to June, making it the single largest expenditure.
The debt repayment was bigger than Kenya’s combined development spend of Sh333 billion in the period and eight times that of infrastructure like roads that stood at Sh55 billion.
Kenya has ramped up spending in recent years to build a modern railway, new roads and electricity plants, driving up borrowing to plug budget deficit amid tax shortfalls.
The country’s public debt stood at Sh3.5 trillion in March, up from Sh2.1 trillion in November 2013, a growth that has raised concerns that the growing appetite for loans risks hurting the economy on huge debt repayment burden.
The Sh421.8 billion is about 38 per cent of the Sh1.108 trillion that the Kenya Revenue Authority (KRA) raised as taxes in the year to June, mean the debt payment took Sh0.40 of every shilling the taxman collected.
Data from the Treasury shows that net domestic borrowing for the full year hit Sh506.2 billion above the revised borrowing target of Sh427.6 billion.
The Treasury had initially planned to borrow Sh397 billion, meaning the borrowing for the year to June was Sh109 billion above budget.
This came when the KRA failed to meet its tax collection targets by Sh33 billion, prompting the State’s increased borrowing.
A number of local and international agencies have expressed concern over Kenya’s rising appetite for borrowing to finance state expenditure.
In March, the International Monetary Fund (IMF) warned that Kenya’s planned borrowing for mega projects in the pipeline risks pushing debt to unsustainable levels.
The World Bank has also warned that Kenya’s huge appetite for Chinese loans risks choking the economy on huge repayment burden. But the Treasury insists that the debt level is still manageable.
“A recent debt sustainability analysis conducted jointly by the government, the IMF and the World Bank concluded that Kenya continues to face low risk of debt distress, with the net present value of our public debt to GDP being below 50 per cent,” Treasury minister Henry Rotich said in his June 8 budget speech.
The government is increasingly relying on debt to finance infrastructure projects , denying Treasury the cash to finance critical projects like roads.