AfDB warns Kenya of debt turbulence on maturing loans

Kamau Thugge
Treasury Principal Secretary Kamau Thugge. FILE PHOTO | NMG 

A rapid build-up of costly public debt in the past five years has put the Kenyan economy at the risk of turbulence, the African Development Bank (AfDB) has warned in new research.

Kenya’s public debt crossed the Sh5 trillion mark for the first time in June last year, representing a growth of 14.3 per cent over Sh4.41 trillion a year earlier.

The rise has shone a light on Treasury mandarins and renewing the protracted debate on the country’s ability to carry the load in the long term.

“The public debt-to-GDP (gross domestic product) ratio increased considerably over the past five years to 57 per cent at the end of June 2018,” says the AfDB in a new outlook. “Half of public debt is external.”

The Treasury mandarins have often maintained that Kenya can bear its current debt load.


The Treasury said last year it is engaging international investors that Kenya owes money to ensure looming debt obligations are managed effectively without exposing the country’s coffers to liquidity pressures.

“The share of loans from non-concessional sources has increased, partly because Kenya issued a $2 billion Eurobond in February 2018,” says AfDB.

“An October 2018 International Monetary Fund debt sustainability analysis elevated the country’s risk of debt stress to moderate.”

Last August, the Treasury kicked off recruitment of a team of debt management experts in a move that signalled rising concern over Kenya’s spiralling loans load that has exerted liquidity pressures on the economy.

Up to 20 experts were sought in the recruitment drive that was intended to sharpen the government’s focus on management of costs and ability to raise and service new debt, according to the Treasury.

“They will provide guidance in determining borrowing ceilings for national and county governments,” Treasury Principal Secretary Kamau Thugge said then.