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Interest payments on public debt increase 18pc

DEBT

The total stock of public debt stood at Sh5.05 trillion at the end of June. FILE PHOTO | NMG

The interest paid on Kenya’s public debt rose past the Sh300 billion mark in the year to June 2018, new Treasury filings show, highlighting the steep cost of servicing the country’s debt ,which has crossed the Sh5 trillion mark.

The Treasury’s annual public debt management report shows that the taxpayer coughed up Sh321.2 billion in interest for domestic and external debt for the 2017/18 fiscal year, an 18.4 percent increase on the Sh271.2 billion in interest paid in the previous fiscal year.

The cost of external debt rose faster than that of domestic loans, reflecting both the bigger stock of money borrowed from the international markets and higher interest rates as the country increasingly turns to foreign commercial loans.

Foreign debt interest payments stood at Sh81.7 billion in the period, a 40 per cent increase year-on-year, while domestic debt interest rose by 13 percent to Sh239.5 billion.

Total debt service (interest plus principal payments) amounted to Sh459.5 billion, up by Sh150 billion compared to the year ending June 2017.

“The ratio of debt service to revenue increased to 33.8 per cent by end of June 2018 from 23.6 per cent by end of June 2017. This was as a result of higher stock of external commercial debt maturing in 2017/18,” says the Treasury in the report.

The total stock of public debt stood at Sh5.05 trillion at the end of June.

Kenya has taken on more foreign commercial debt through Eurobond issues and syndicated loans in recent years, with the country’s reclassification as a lower middle income economy making it more difficult to access concessional loans normally offered to poor countries.

The split of debt is now in favour of external loans, which account for 50.9 per cent of total public debt, up from 44.5 per cent five years ago.

Central Bank has also been making efforts to contain the cost of domestic debt by rejecting expensive bids on the securities auctions—effectively bringing down the yield curve in the past year.

On the long end of the curve—for long term bonds—the yield curve currently stands at 13 percent, down from about 13.5 percent a year ago.

Short-term papers have also seen their yields come down progressively in the past one year. The rate on the 91, 182 and 364-day Treasury Bills fell by 47, 37 and eight basis points respectively in the 12-month period.