Kenya’s public debt high, says Treasury

Treasury Building in Nairobi. 

In Summary

• MPs again pushed it to Sh2.5 trillion in December last year, raising concern from analysts and the Opposition that government borrowing was unsustainable. 
• According to Treasury Cabinet Secretary Henry Rotich, growth of external debt is attributed to the recent floating of an international sovereign bond worth Sh176 billion.
• “The success of the sovereign bond helped to consolidate macro-economic stability by strengthening the shilling, stabilising import prices and reducing the cost of living,” Mr Rotich said in his remarks.

By JOHN NJAGI

Kenya’s public debt has reached unsustainable levels, mainly due to heavy government borrowing to fund massive infrastructure projects, findings released by the Treasury have shown.

The Annual Public Debt Report released in December last year, shows that the debt to gross domestic product (GDP) has been growing steadily since June 2013 from Sh1.8 trillion or 42 per cent of the GDP to Sh2.4 trillion last year, (47.9 per cent).

DEBT CEILING RAISED 

In 2013, the debt ceiling was raised by the National Assembly from Sh800 billion to Sh1.2 trillion.

MPs again pushed it to Sh2.5 trillion in December last year, raising concern from analysts and the Opposition that government borrowing was unsustainable.

Kenya requires at least Sh5.7 trillion to fund mega projects, including the Sh327 billion standard gauge railway, Lamu Port and South Sudan Ethiopia Transport project, generation of 5,000MW of power, the Galana Irrigation Scheme and the crude oil pipeline from Turkana to Lamu.

Other initiatives are the Northern Corridor integration projects, the second container terminal and berth, power transmission lines and the tarmacking of 10,000 kilometres of roads.

According to Treasury Cabinet Secretary Henry Rotich, growth of external debt is attributed to the recent floating of an international sovereign bond worth Sh176 billion.

“The success of the sovereign bond helped to consolidate macro-economic stability by strengthening the shilling, stabilising import prices and reducing the cost of living,” Mr Rotich said in his remarks.

At 47.9 per cent of the GDP, the public debt is above the 45 per cent Treasury threshold and so is the overall fiscal deficit, which stands at eight per cent against a target of below 5 per cent.

However, Mr Rotich said the debt analysis for Kenya indicates that it is sustainable over the medium term.