Moody’s warns in a report released on Wednesday warns that the quick rise in expensive public debt obligations is weakening the country’s ability to repay its lenders.
The Treasury has, however, differed sharply with Moody’s assessment, maintaining that Kenya’s debt remains sustainable.
Yet another authoritative voice, global credit ratings agency Moody’s, has raised the red flag over Kenya’s rapidly rising public debt.
Moody’s warns in a report released on Wednesday warns that the quick rise in expensive public debt obligations is weakening the country’s ability to repay its lenders.
The Treasury has, however, differed sharply with Moody’s assessment, maintaining that Kenya’s debt remains sustainable.
Moody’s downgrade of Kenya’s credit rating this week is in contrast with positions taken by Standard and Poor’s as well as Fitch, two equally reputable international agencies.
Fitch and Standard and Poor’s are officially contracted by the Kenyan Treasury to assess the country’s ability to repay its debts, while Moody’s issues unsolicited credit reports.
Reports issued by the two firms have tended to project a more optimistic outlook of Kenya’s position, rating the country’s ability to repay a notch higher than Moody’s.
Some Treasury insiders have interpreted Moody’s more gloomy outlook on Kenya to suggest that it does not have as much access to information on Kenya’s economy as Fitch and Standard and Poor’s do.
Some have even read ill will on the part of Moody’s timing of its latest downgrade, coming at a time when the Treasury is on a tour of Western financial capitals to market a new multi-billion shilling Eurobond.
Criticism is never easy to take, but the Treasury would do better to focus on the numbers rather than brush aside Moody’s warnings.
The latest projection by the Treasury shows that Kenya will spend nearly Sh1 trillion, more than half of its projected tax revenue next year, to repay public debt.
The amount far exceeds the cash transfers to all 47 county governments. The consistent message coming from the Treasury has been that Kenyans need not worry, since the public debt is still at a manageable level when measured against the gross domestic public (GDP).
Growth in tax revenue relative to the rise in public debt is however a much clearer yardstick that can be used to measure a country’s ability to repay its debts.
When the debt load grows at a rate that far outpaces revenue generation, like is the case for Kenya, there is real cause for alarm.
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