Kenya racks up Sh628b public debt in a year to hit Sh3.5tr mark

The total amount that Kenya owes local and international financiers increased to Sh3.56 trillion as of September this year.

This is as the country continued to borrow heavily to finance mega infrastructure projects.

Public debt grew by Sh628.3 billion in the one year period to September 2016 from Sh2.94 trillion at the end of September last year.

The National Treasury, in its Quarterly Economic and Budgetary Review said at Sh3.56 trillion, the public debt was equivalent to 47.97 per cent of the Gross Domestic Product (GDP) and within manageable levels. The gross public debt comprises 52 per cent domestic debt and 48 per cent external debt.

"The overall increase is attributed to increased external debt due to exchange rate fluctuations, disbursements from external loans and more uptake of domestic debt during the period," said the Treasury in the review of the first quarter of the 2016/17 financial year.

Gross domestic debt increased by Sh466.6 billion to Sh1.85 trillion in September, from Sh1.38 trillion in September last year.

External debt, which is usually denominated in dollars, grew by $2.18 billion (Sh218 billion) to $16.9 billion (Sh1.69 trillion) by end of September from $ 14.72 billion (Sh1.47 trillion) in September 2015.

The external debt stock comprised of loans advanced by other countries to Kenya or multilateral debt (31.6 per cent), multilateral institutions (42.0 per cent), commercial banks (25.9 per cent) and suppliers' credit (0.5 per cent).

China stood out as the largest lender to Kenya, with the amount advanced by the Asian economic giant reaching Sh308 billion as of September. The level of Chinese loans has risen steadily from Sh92 billion in September 2014 to the current levels. The sharp rise has in part been due to the Standard Gauge Railway, which is 90 per cent financed by a loan from the Exim Bank of China.

The World Bank has recently warned that Kenya's debt levels were getting to alarming rates and could soon rise to levels that the country might find difficult to pay comfortably, adding that margins for further debt accumulation are narrowing.

"Although public debt remains sustainable, margins for manoeuvre are rapidly narrowing," the World Bank said in its early November report titled Beyond Resilience: Increasing Productivity of Public Investments.

The Treasury Economic and Budget Review also said the economy grew 6.2 per cent in the quarter to June 30 this year. This was an improvement from a growth of 5.6 percent over a similar quarter last year.