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Short-term debts puts pressure on Treasury's limited coffers

FINANCIAL STANDARD
By Otiato Guguyu | February 21st 2017
Treasury Cabinet secretary Henry Rotich addressing the press. (Photo: Jenipher Wachie/Standard)

Servicing loans from China, Kenya's biggest bilateral lender, is set to get tougher in the next few years.

Kenya will wire Sh150 billion to China in the next four years as the country settles its debts with our biggest bilateral lender.

The money in interests and principle is owed to the Chinese government, through Exim Bank of China and China Development Bank.

Treasury documents show that the country is settling Sh21.2 billion this year, which will edge up to Sh26.6 billion in the next financial year.

However between 2018 and 2019 the debt will almost triple from Sh29.1 billion to Sh73.6 billion in 2019.

Kenya's total external debt servicing would double this year from Sh96 billion to Sh211 billion before hitting Sh301 billion in 2018.

Kenya's total external debt climbed from Sh763 billion to Sh1.7 trillion in the last five years, representing half of the country's total debt

As of June last year, the total public debt including publicly guaranteed debt stood at Sh3.6 trillion, up from Sh2.8 trillion recorded in 2015.

This put the total public debt at 54.8 per cent of the country's the total dollar value of all goods and services produced.

This financial year, Kenya is set to borrow Sh523 billion domestically and locally. "The fiscal deficit will be financed by net external financing of Sh206 billion, Sh328. 9 billion domestically and the difference of Sh3.8 billion from domestic loan receipts and Sh15 billion loan repayment to CBK," Finance Cabinet Secretary Henry Rotich said.

CS Rotich said the National Treasury would continue to carefully evaluate the situation to ensure the country is in a position to service the debts.

The CS had told parliament earlier this year that most of Kenya's debt is long-term and with the payments for over 63 per cent of debt maturing after over 10 years. Only 11.4 per cent of Kenya's debt is to be paid within four years.

However most of the credits the Government is now securing are short term which will pile pressure on servicing.

"The external debt with maturity of more than 10 years has been declining, while the category of between 1 and 10 years has been rising indicating the hardening of average external debt terms," CS Rotich said.

The Government however believes that the country will collect enough taxes to meet the repayments.

According to Treasury financials, the Kenya Revenue Authority had collected Sh687 billion by last month against aSh1.3 trillion target.

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