Government borrows Sh585b beyond the Sh10tr debt ceiling

Controller of Budget Margaret Nyakang'o. [David Gichuru, Standard] The government has exceeded the legal borrowing limit of Sh10 trillion by Sh585 billion, Controller of Budget Margaret Nyakang'o has revealed.According to the National Government Budget Implementation Review Report for the first quarter of the 2023/2024 financial year, the total public debt as of September stood at Sh10,585.1 billion. The report revealed that the Sh10.585 trillion debt is composed of Sh5.67 trillion in external debt and Sh4.92 trillion in domestic debt. Dr Nyakang'o noted that public debt has grown rapidly over the years, with the public debt stock increasing by Sh1.44 trillion between December 2022 and September 2023. The report indicated that the highest growth in public debt occurred in 2020 and 2023, recording Sh1.23 trillion and Sh1.44 trillion, respectively. "The total public debt increased from Sh1.32 trillion in 2010 to Sh10.59 trillion in September 2023, translating to an average growth rate of 16 per cent per year, or an equivalent of Sh661.79 billion per year." According to the report, the government's ambition to carry out extensive infrastructure development programmes to stimulate economic growth has resulted in high spending and huge fiscal deficits. Dr Nyakang'o stated that the projected total expenditure for this financial year is Sh4.72 billion, marking a 13.2 per cent increase from last year. This has resulted in a fiscal deficit of Sh634.10 billion, which will be financed through domestic and foreign borrowing. The deficit, however, is lower than the Sh759.66 billion posted in the last financial year. The report noted that the depreciation of the Kenyan shilling against major world currencies has escalated the public external debt stock and increased the cost of public debt service. In the first quarter ending September, the government paid Sh154.85 billion to service external debt. This included a principal repayment of Sh91.75 billion and interest payments amounting to Sh63.09 billion. To manage the escalating cost of public debt service effectively, Dr Nyakang'o suggested that the National Treasury should enact fiscal consolidation measures to cut down on non-productive public expenditures. She said that borrowing should be exclusively for financing productive projects. "The National Treasury should pursue economic policies that support accelerated economic growth to enable the country to grow out of debt in the long run." The Controller of Budget advised that the National Treasury should prioritize long-term financing over short-term to manage repayment effectively and address liquidity issues caused by short-maturity public debt. "Finally, there is a need to ensure openness and accountability in selecting projects and activities to be funded using debt. These projects should have positive returns to ensure that long-term benefits outweigh the short-term cost of borrowing. In addition, strong institutions need to be built to ensure project funds are utilised prudently during project implementation," said Dr Nyakang'o.

Government borrows Sh585b beyond the Sh10tr debt ceiling

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Government borrows Sh585b beyond the Sh10tr debt ceiling

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