Kenyans will have to bear a heavier debt load after the country’s stock of borrowed cash inched closer to the Sh7 million mark.
The latest data from the Central Bank of Kenya (CBK) shows that total public debt in the financial year ending June 30 went up by Sh840.9 billion to Sh6.65 trillion.
This is as the National Treasury sought to plug a budget deficit that had been occasioned by Covid-19 pandemic. By the end of June last year, public debt stood at Sh5.8 trillion.
Stringent containment measures, including curfews, ban on social gatherings, and partial lockdowns depressed economic activities, which meant poor revenue collection by the Kenya Revenue Authority (KRA).
The national purse left with little income of its own and with increased expenditure needs owing to the negative effects of Covid-19 has forced Treasury to go for more loans.
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At Sh6.65 trillion, this means that every Kenyan now owes creditors - both local and foreign - Sh139,705 against a per capita (per person) income of Sh204,831. This means that for every Sh100 that you earn, creditors from pension funds in the US to local insurance companies, have a Sh68 stake.
When the Jubilee regime came into office in 2013, for every Sh100 that a Kenyan earned, creditors’ stake on a Kenyan’s wealth was only Sh40.
President Uhuru has insisted that the increased borrowed cash has been used to build roads, railways, ports, energy projects, and dams among other projects. However, critics have questioned the quality of the projects which they insist, have not culminated into increased productivity.
National Cabinet Secretary Ukur Yatani has insisted that there is nothing to worry, even as the International Monetary Fund (IMF) reviewed the country’s risk to debt distress from moderate to high, citing debt vulnerabilities occasioned by Covid-19.
“Our debt limit has been quite sustainable. We have never defaulted on any payment that has fallen due,” said Yatani in an earlier interview with The Standard.
“We want to be more pro-active by making sure that we retire all the commercial loans,” said Yatani in an earlier statement. Commercial loans, he noted, have an interest of between eight and nine per cent. They also have shorter grace and maturity periods.
As a result, Yatani embarked on a belt-tightening mission that saw the budgets for traveling, advertisement, and hospitality slashed.
Unfortunately, the virus scuttled his plans, with the country’s appetite for debt inflamed by Covid-19. Adjusting for debt repayment and improved revenue collection, Treasury is expected to breach this limit in 2023, with the country’s debt increasing by Sh2.94 trillion, according to official data.
Slightly over half of the net borrowing as of May, Sh473 billion, were external loans with a good chunk coming from multilateral entities such as the World Bank, IMF and African Development Bank to help the country fight the economic effects of Covid-19.
Another Sh367.6 billion were added into the share of domestic debt which includes short-term Treasury bills and long-term Treasury bonds.
This figure does not include a net borrowing of Sh26 billion that had been incurred from the domestic market by the end of the 2019/20 financial year.
The net increase of Sh840.9 billion factors in debt repayments during the period under review, which means Treasury might have borrowed more.
Kenya’s debt service obligation is the second-highest in Africa after Ethiopia with the country paying creditors Sh20 for every Sh100 it earns from its exports. Ethiopia pays Sh25.