Kenya's Public Debt Hits Sh5 Trillion Mark as Appetite for Borrowing Grows

Kenya’s public debt has hit Sh5 trillion mark for the first time, raising questions over the country’s ability to sustain the load in long term.

As at February this year, Kenya's total outstanding external debt stood at Sh2.563 trillion, while Sh2.448 trillion is owed to local lenders, making a total Sh5.011 trillion, Business Daily reports.

This means that the country will in the next several years spend a sizable part of its budget on debt servicing obligations, including interest and principal repayments, which is likely to stifle spending on development.

Speaking during a recent forum organised by the Vision 2030 Delivery Board, Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge attributed the continued appetite for borrowing to corruption.

“It (corruption) affects our economy and our society first by shifting the resources away from the areas of greatest need into personal pockets or for the people that are involved in corruption. You end up having no money to finance education, no money to pay nurses, no money to repair roads because some of the resources have been deviated into other areas,” said Dr Njoroge.

Genghis Capital, an investment bank, projects that debt servicing could consume up to 51.56% of revenue in fiscal year 2018/19 from 40.13% currently, surpassing the 30.00% debt sustainability threshold by a wide margin.

“The external debt redemptions will feature significant maturities in Standard Chartered syndicated loan (Sh78.74 billion) and 5-year debut International Sovereign Bond (Sh78.30 billion). Overall, public debt redemptions will comprise 54.06 per cent of total public debt obligations in fiscal year 2018/19,” the investment bank said.

“That ratio shows how health an economy is. Its about half of the revenue collected and that is a big issue."