Treasury admits to debt crisis as borrowing window narrows

National Treasury Cabinet Secretary Njuguna Ndung'u during MOU signing on School feeding programme for public primary School's in Nairobi. [Wilberforce Okwiri, Standard]

Kenya's headroom for more public borrowing is narrowing, the National Treasury has warned.

Treasury Cabinet Secretary Njuguna Ndung'u said this is compounded by lower than expected revenues in what could impact on the government's ability to deliver on its ambitious bottom up promises.

"The economy faces two extreme constraints: financing constraints as tax revenues generated cannot finance the development we wish to have, and on the other extreme we have limited headroom for debt," he said yesterday at a forum organised by the Diamond Trust Bank (DTB).

"We are choked with inherited debt that must be paid."

Public debt stands at Sh9.6 trillion, according to the latest estimates, as both domestic and external liabilities rise rapidly.

President William Ruto’s revenue plan is also yet to gain momentum as tax collection in the just-ended financial year fell short of the government's target.

This dealt a major blow to the President’s efforts to fund his costly campaign promises and repay mounting public debt at a time his administration’s additional taxes are stoking tensions amid a high cost of living.

Parliament recently acceded to the Treasury’s request to raise the debt ceiling to a percentage of gross domestic product rather than a specific number.

Kenya’s public debt grew by nearly Sh700 billion in the six months to March this year under Ruto’s government, pointing to a sustained borrowing appetite.