Kenya’s public debt grew at the slowest pace in four years in the 12 months to September 2022, pointing to a declining borrowing appetite by the government amid growing concerns that the country is headed to a debt crisis.
The Central Bank of Kenya (CBK) data shows that Kenya’s debt grew by Sh762.7 billion in the year to September 2022 to stand at Sh8.7 trillion as the country races towards the Sh10 trillion borrowing cap set by Parliament last June.
The debt stock represents 62.3 percent of Kenya’s gross domestic product (GDP) with the domestic stock standing at Sh4.38 trillion as external debt amounted to Sh4.35 trillion.
The public debt had surged by Sh879.7 billion in the year to September 2021 and by Sh1.16 trillion in a corresponding period a year earlier.
In the period between September 2018 and September 2019, the country’s debt rose by Sh817.2 billion.
The decline in growth has partly been attributed to the aggressive interest rate hikes by major central banks in the developed world as advanced economies battled to tame soaring inflation.
Experts say the rate hikes in first-world countries have encouraged the raising of rates on sovereign debt and destabilised the currencies of developing economies.
Kenya’s debt stock is set to expand after the International Monetary Fund (IMF) approved a Sh81.7 billion loan just a fortnight ago, paving the way for the immediate release of the funds for budgetary support.
In June last year, MPs raised the debt ceiling to Sh10 trillion as a stop-gap measure to allow the government to borrow Sh846 billion to plug the budget deficit in the current fiscal year.
Former President Uhuru Kenyatta’s Jubilee administration heavily relied on loans to fund capital-intensive projects consequently ballooning the public debt from a Sh1.89 trillion stock inherited from the late President Mwai Kibaki to the Sh8.7 trillion at the time Mr Kenyatta left office.
This means the regime borrowed a cumulative average of Sh6.7 trillion during its nearly 10-year tenure.
The most notable project funded through borrowing during Kenyatta’s reign is the standard gauge railway (SGR) whose commercial viability has been the subject of intense scrutiny.
When the Covid-19 pandemic struck in 2020, the country’s tax revenue collection was adversely interrupted at a time when more of its debts were falling due making it even harder for the government to meet its repayment obligations.
The rapid accumulation of debt, especially from China, has caused anxiety among analysts and activists in recent years mainly due to the non-disclosure of the terms to the public.
“Today, taxpayers and even lenders have limited access and little ability to interrogate borrowing decisions, something, which has continued to fuel speculations on the credibility of public debt figures and underlying contracts,” states investment analyst George Bodo.
During his campaigns in the run-up to the August 9 election, President William Ruto had vowed to scale back spending on mega projects as a measure to address unsustainable borrowing, saying he would pump more money into small businesses as part of efforts to expand the tax base.
“Debt must be the last resort. We must not be slaves of debt from any place or any country,” said Dr Ruto.
During Kibaki’s reign, whose administrative approach President Ruto largely seems to mirror, the government chiefly kept away from commercial credit, opting instead to have aid from institutions such as the IMF and the World Bank come in form of project support.