More calls for State to tame ballooning public debt

The ballooning public debt should be tamed before it puts the economy at the risk of turbulence, a risk consultancy warned on Wednesday, adding its voice to the growing concern over the State’s appetite for foreign loans.

Mr Daniel Heal, a senior partner at Control Risks said Kenya must urgently take control of its budget before the downsides of huge loans reverse fortunes of 2018 “which is promising to be the year for the entire East Africa”.

“We have started to see the recovery of investor confidence due to the return of political stability in Kenya, as well as the renewed interest in major infrastructure projects both in Kenya and across the region,” said Mr Heal.

“However, in Kenya, a pending repayment of the first portion of a Eurobond worth $774.8 million in 2018 should be a trigger for the government to focus attention on controlling public borrowing and spending before debt becomes unmanageable.”

The State has in the past few years borrowed heavily to finance mega projects.

For instance, the Treasury issued a 15-year infrastructure bond worth Sh40 billion, exerting more pressure on public debt that is now threatening to cross the Sh5 trillion mark.

READ: AfDB warns of Kenya debt distress risk as more loans mature, projects 5.6pc growth

According to recent forecast, borrowing could soon take the debt load past 65 per cent of the national output.

It is expected that out of the country’s total debt of Sh4.38 trillion, about Sh1 trillion will be maturing in one year.

Mr Heal said that while Kenya remains highly unlikely to default on its debt, growing interest payments and international banks’ shrinking appetite to provide further loans will result in lower public spending, which has been a key driver for economic growth in recent years.