'Broke' government living large: Ruto adds Sh3tr to public debt

President William Ruto, Deputy President Rigathi Gachagua, National Assembly Majority Leader Kimani Ichungwah, and his Senate counterpart Aaron Cheruiyot arrive for the joint National Executive Retreat and Parliamentary Group Consultative Meeting in Naivasha, Nakuru County on February 19, 2024. [PCS, Standard]

In the one and a half years that President William Ruto’s government has been in office, it has increased Kenya’s public debt by more than Sh3 trillion.

This is according to a brief that formed the basis of some of the discussions at the Cabinet retreat in Naivasha earlier this week.

The document says the Kenya Kwanza regime has borrowed Sh3.01 trillion but also received Sh334 billion as grants over the period it has been in office. 

The amount is, however, higher than the Central Bank of Kenya’s figures. According to CBK, Kenya’s public debt stood at Sh11.14 trillion as of December 2023, which would mean an increase of Sh2.44 trillion from Sh8.7 trillion in September 2022, when President Ruto was sworn into office.  But CBK’s data does not factor in loans that the government may have taken in January and February this year, which may have been included in the cabinet brief. 

The heavy borrowing is despite Dr Ruto coming to power on the promise that his administration would slow down on borrowing, 

“The money situation is big, with Sh3.34 trillion for loans and grants. Out of this, Sh3.01 trillion is for loans, and 33.21 per cent of it is used. There’s also Sh334 billion for grants, and 22.98 per cent of it is used. The completion rate for programmes and projects is 30.24 per cent,” reads the Cabinet brief.  The Cabinet retreat was also attended by the Kenya Kwanza Parliamentary group and other State technocrats.

 “The year 2024 is expected to be a consequential period in the Administration’s tenure in office as the implementation of key flagship programmes and projects under the Bottom-Up Economic Transformation Agenda (BETA) begin to take shape, guiding the nation along a path of national renaissance” reads the brief. 

The President harshly criticised his predecessor Uhuru Kenyatta, who over his 10-year tenure, increased Kenya’s debt by Sh6.8 trillion. Dr Ruto before ascending to power had said debt would be the last resort under his regime. 

In the first two years after the former Jubilee administration came into power, public debt grew by Sh850 billion from Sh1.89 trillion in April 2013 to Sh2.74 trillion in April 2015.

Kenya Kwanza has, however, been leaning more towards concessional loans, with some of the lending from multilateral lenders expected to help the government retire some of the expensive loans acquired by the previous regime. “In the interest of sound debt management, we have implemented a combination of strategies, including the diversification of financing sources, smoothening the maturity profiles and proactively managing our debt liabilities in general, maintaining a low cost of debt and ensuring that debt is sustainable at all times,” said the President yesterday following the repayment of $1.5 billion (Sh213 billion at current exchange rate) of the $2 billion (Sh284 billion) Eurobond that is due in June this year. “Upon assuming office… we have pursued a turnaround strategy focused on increasing tax revenues and reducing both spending and the rate of debt accumulation.” 

Treasury has always exuded confidence during the budget-making process, saying it would cut unnecessary spending to reduce the budget deficit. Despite the optimism, Auditor General Nancy Gathungu is of a different opinion, noting that all indicators are that Kenya’s debt is getting to unsustainable levels.

“The public debt accumulation is attributed to high fiscal deficits,” said Ms Gathungu yesterday, noting that Kenya’s appetite for Eurobonds is a slippery slope that is making the country’s public debt unsustainable. She said over the six years between June 2018 and June 2023, public debt more than doubled from Sh4.8 trillion to Sh10.26 trillion.

She also took issue with borrowing through Eurobonds, which she noted are costly not just because of the higher interest rates but also due to other costs of issuing these bonds including commissions paid to companies that arrange them.