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CBK cautions headroom for more debt is contracting

The country’s headroom for more public debt is narrowing, the Central Bank of Kenya (CBK) has warned, advising the Treasury to instead adopt alternative forms of financing for mega projects.

Governor Patrick Njoroge, while insisting that public debt levels at about 50 per cent of the GDP pose no systemic risk to the economy, said the Exchequer must take caution in taking more liabilities.

“At this point we do not see our public debt level as being unsustainable. That is not the concern today. We also know why we borrowed; a lot of the borrowing was for infrastructure investment of which we do see a large deficit,” said Dr Njoroge.

READ: Kenya’s low risk debt window under threat, say economists

“The issue is that room for borrowing to finance projects like that is always narrowing because debt levels have risen and we need to look ahead. Going forward we need to have alternative ways of financing those specific projects.”

He cited private public partnerships (PPPs) which he noted offer room to implement required mega projects while easing pressure on public coffers.