Kenya’s public borrowing has gone up by at least Sh691 billion since the beginning of 2017 as credit uptake to finance a large budget deficit pushed the country’s debt load to Sh4.5 trillion.
Latest data from Central Bank of Kenya (CBK) shows the outstanding stock of domestic debt stood at Sh2.208 trillion on December 15, while the external debt stock stood at Sh2.31 trillion at the end of September.
The country has been undertaking massive infrastructure projects bankrolled using billions in foreign financing, partly because an ever-growing recurrent expenditure bill has taken up about 90 per cent of the country’s ordinary revenue.
Experts are now cautioning the country needs to put in place serious fiscal consolidation measures to slow down the debt accumulation that has seen the debt to GDP ratio rise to 57 per cent from 54 per cent in June 2016 as per World Bank estimates.
“The expansionary fiscal stance and underperformance in revenue generation has led to a continued rise in the stock of debt,” said the Bretton Woods twin in its December 2017 Kenya economic update.
“The overall surge was attributed to increase in both external and domestic debt, as government borrowed to finance the fiscal deficit.”
The World Bank, however, still rates the country at low risk of debt distress.
In the current fiscal year running to June, the Treasury projects the budget deficit will hit Sh691.2 billion, which it expects to plug by making a net Sh410.2 billion in domestic borrowing and Sh277.3 billion in external borrowing.
Meeting this target is likely therefore to push the total debt load close to the Sh5 trillion mark.
A debt report tabled in Parliament by the Treasury early December showed that in the first four months of the fiscal year, the government contracted new external loans totalling Sh361.8 billion, with most of it intended to finance development projects in the water and sanitation, energy and education sectors.
However, Sh77 billion will go towards rolling over a maturing syndicated loan taken two years ago.
On the domestic front, the government’s net borrowing stands at about Sh79 billion with half the fiscal year gone, meaning that there could be a spike in domestic borrowing in the second half of the year in order to meet the target.