Uhuru says no cause for alarm on Kenya debt pile

President Uhuru Kenyatta has dismissed International Monetary Fund (IMF) concerns over the continued pile-up of public debt and risk of default.

Mr Kenyatta said Kenya's high ratio of debt against the gross domestic product (GDP) does not worry him.

The IMF last week raised its assessment of Kenya’s external debt distress from low to moderate, saying the country has breached, for an extended period of time, the external debt indicators debt service-to-revenue ratio.

"What would worry me is if the debt that we have incurred has gone into recurrent expenditure, has gone into paying salaries or electricity bills and so on and so forth. But what we have utilised our loan for is to close the infrastructure gap," he said.

The President made the remarks in an interview with CNN's Richard Quest that was recorded last Friday and aired on Monday night.

57pc debt-GDP ratio

Kenya’s public debt to GDP ratio stood at 57 per cent in June.

The Jubilee administration has ramped up spending since 2013 to build much-needed new roads, a modern railway, bridges and electricity plants, driving up borrowing to plug the budget deficit.

The increased debt has seen Kenya commit more than half of taxes to paying loans, leaving little cash for building roads, affordable housing and revamping of the ailing health sector.

Public debt stood at Sh5.04 trillion in June 2018, up from Sh4.41 trillion in June 2017, Sh3.62 trillion in June 2016, Sh2.83 trillion in June 2015, Sh2.37 trillion in June 2014 and Sh1.89 trillion in June 2013.

The growth in Kenya’s debt has raised concerns that the ballooning repayment costs are hurting economic activities by taking up a large chunk of government revenue.

Mr Jibran Qureishi, the regional economist for Stanbic Bank, said growth in public debt has partly been driven by over-budgeting leading to ambitious tax targets, which have largely been missed.
The increased debt has seen Kenya commit more than half of taxes to paying loans. Taxpayers will spend Sh870.52 billion on debt repayments or half of taxes in the year to June.

Healthy 'mix'

Mr Kenyatta says Kenya has a "healthy mix of debt" because the country's lenders are not only China but also Japan, United States and many others.

Mr Quest was probing the President on whether he is aware of China's "another agenda" in the loans it is giving to African states. "Why are we focusing only on one lender?" Mr Kenyatta asked.

"As far as I am concerned, we have a very healthy mix of debt from the multilateral lenders — who are basically the World Bank and the African Development Bank — to bilateral lenders like Japan, China, France, all who are participating and working with us to help us achieve our objectives," added Mr Kenyatta.

On the question of China's intentions, he replied: "We have an infrastructure gap that we need to fill and we are going to work with our partners across the globe who are willing to partner and to work with us."

The president noted that Japan is the biggest lender to Kenya's port projects while France is a major funder of electricity generation projects.