The stock of Kenya’s overall debt has crossed the Sh10 trillion mark on increased borrowing during President Willam Ruto’s first year in office, burdening the taxpayer with more repayment obligations.
New data from the Treasury and the Central Bank of Kenya (CBK) place Kenya’s debt stock at Sh10.189 trillion at the end of June 2023 in contrast to Sh8.579 trillion in June last year.
The rate of debt accumulation has surpassed previous projections by the National Treasury. For instance, the Treasury had in its 2023 Budget Policy Statement estimated the size of the country’s debt stock to stand at Sh9.412 trillion at the end of June 2023.
The debt stock is also already above the Sh10.13 trillion that had been projected for June 2024 — mirroring the faster-than-expected accumulation of public debt and borrowing.
The split of Kenya’s public debt stands in favour of external borrowing at Sh5.452 trillion against Sh4.736 trillion in the domestic account.
The share of external debt stands at 53.51 percent of total debt against 46.48 percent in domestic borrowing with the portion of foreign loans growing from a low of 50.01 percent in June 2022 while the share of domestic loans has decelerated from 49.98 percent over same period.
The faster growth in external loans is partly attributable to a weaker exchange rate with the shilling having shed nearly 20 percent of its value against the US dollar on a year-to-date basis.
At the same time, while Kenya has largely been locked out of the international capital markets, the country has been able to keep the taps open from a multilateral financing perspective with lenders such as the World Bank and the International Monetary Fund (IMF) remaining crucial to budget support.
For instance, the IMF approved the disbursement of Sh61.1 billion ($415 million) to Kenya in July bringing its cumulative disbursements to the country to Sh300.1 billion ($2.04 billion) since April 2021 under a multi-year programme.
The Washington-based lender further approved the disbursement of Sh81.1 billion ($551.4 million) under a new plan dubbed the resilience and sustainability facility to support Kenya’s efforts in combating the effects of climate change.
The Treasury is expected to continue leveraging concessional funding from multilateral institutions to plug the financing gap in 2023/24.
The upside to concessional financing has seen the Treasury revise its estimate upwards for net foreign financing to Sh449 billion from Sh131 billion.
The greater prospects for foreign financing have seen the exchequer cut its dependence on domestic financing with the target coming down to Sh415.3 billion from the previous estimate of Sh587.4 billion.
Despite the faster-than-expected growth in the country’s debt stock, the Treasury says the government remains committed to fiscal consolidation, which it expects to achieve largely from enhanced revenue mobilisation.
The National Assembly recently amended the Public Finance Management Act of 2012, revising Kenya’s debt ceiling from a cap of Sh10 trillion to a moving target/placeholder of no more than 55 percent of GDP and present value terms.