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Economy

Treasury seeks experts to manage Sh5trn debt

Treasury principal secretary Kamau Thugge. FILE PHOTO | NMG
Treasury principal secretary Kamau Thugge. FILE PHOTO | NMG 

The Treasury is recruiting a team of debt management experts in a move that signals rising concern over Kenya’s spiralling loans load that has exerted liquidity pressures on the economy.

Up to 20 experts are being hired in the recruitment drive intended to sharpen the government’s focus on management of costs and ability to raise and service new debt, the Treasury said in a notice inviting applications for the jobs.

“They will provide guidance in determining borrowing ceilings for national and county governments,” Treasury Principal Secretary Kamau Thugge says in the job descriptions seen by the Business Daily.

The experts will formulate debt management policies…and review proposals to inform the determination of the annual borrowing threshold, the PS says.

The officers will also be tasked with reviewing debt sustainability reporting formats, preparing proposals for debt restructuring as well as liaising with the Central Bank of Kenya (CBK) and other Treasury departments for “effective debt management”, according to the circular.

Kenya’s public debt crossed the Sh5 trillion mark for the first time in June this year, shining a light on Treasury mandarins and renewing the protracted debate on the country’s ability to carry the load in the long term.

The Treasury is seeking to fill numerous debt management positions, including assistant director of debt management, principal debt management officers, chief management officers, assistant director for resource mobilisation, principal mobilisation officers and chief principal mobilisation officer.

Official statistics show that the latest acceleration of the debt pile was mainly attributable to external borrowing, which pushed total outstanding foreign debt to Sh2.563 trillion as at the end of February.

Domestic debt, which is more current having included May data, now stands at Sh2.448 trillion, making for a total Sh5.011 trillion. The Treasury has said that it intends to cut Kenya’s fiscal deficit to three per cent by 2022, and seven per cent of the GDP in the current financial year, down from 9.6 percent of GDP the fiscal year that ended June.

Dr Thugge says the resource mobilisation officers will advise the Treasury on borrowing ceilings, make recommendations for debt restructuring and carry out due diligence on new debt instruments.

“(They will also) review borrowing proposals, loan agreements and participate in loan negotiations,” the PS says.

The Treasury director-general of budget, fiscal and economic affairs, Geoffrey Mwau, said the planned hires are in line with the ministry’s ongoing plan to manage debt effectively.

Rapid debt build-up

The recruitment comes at a time Kenya is struggling to meet the International Monetary Fund’s (IMF) fiscal deficit conditions that are pegged on future availability of a Sh152 billion ($1.5 billion) balance of payment insurance facility.

“We now have the authority to recruit and strengthen the debt and resource mobilisation departments,” Dr Mwau said in an interview.

Rapid build-up of Kenya’s public debt in recent years signals a looming increase in debt servicing obligations, including interest and principal payments, whose ultimate impact is to increase recurrent expenditure and a squeeze on development spending.

Chinese debt accounts for a large part of the build-up in bilateral debt — a large segment of which was taken to finance the standard gauge railway. Concern over Kenya’s debt load is mainly hinged on the fact that it has been rising at a rate that is way ahead of revenue growth, reducing the government’s capacity to pay.

Ordinarily, a country’s ability to pay debt is dependent on the rate at which it generates and grows tax revenues.

Economists have therefore warned that high levels of commercial borrowing means interest payment will soon become Kenya’s biggest challenge in public debt management.

“Kenya’s official policy has been to go for concessional loans, but we haven’t managed that very well in recent times,” said John Mutua, the programmes officer at the Institute of Economic Affairs.

Kenya has since last year come under increasing pressure to slow down its uptake of loans, but the warnings have so far gone unheeded.

“We advise government to work towards reducing debt,” Jan Mikkelsen, the IMF resident representative to Kenya, told Parliament in February, warning that the debt was approaching “unstainable levels”.

But the government has remained defiant in the face of the warnings, arguing that the economy is large and robust enough to bear the debt load.

“I want to assure Kenyans that at no point has the country been at risk of default,” President Uhuru Kenyatta said in March last year.

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