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Kenya to hit Sh9 trillion debt ceiling in a few months

NATIONAL
By Frankline Sunday | October 7th 2021

 

National Treasury CS Ukur Yatani [Elvis Ogina, Standard]

Kenya could hit the Sh9 trillion by the end of next year if the current pace of borrowing is left unchecked. Auditor General Nancy Gathugu yesterday told the Senate Committee on Finance and Budget that public debt is progressively increasing and approaching the approved Sh9 trillion ceiling.

“The outstanding public debt stands at Sh7.6 trillion as at 30th June 2021 which represents 84 per cent of the maximum ceiling of Sh9 trillion approved by parliament,” she said.

According to the Auditor General, Kenya’s expense on public debt has more than doubled from Sh421 billion in 2015 to Sh867 billion in the last financial year.

The new debt stock has been attributed to the government’s uptake of new and more costly commercial debt from both the domestic and external market particularly over the past two years.

 “The growth in public debt is attributed to disbursements of new loans to the government by various development partners and additional borrowings from the domestic mart through Treasury Bonds and Treasury Bills to fund the budget,” said Ms Gathugu.

In 2019, Parliament voted to expand the debt-ceiling to a cap of Sh9 trillion allowing the National Treasury to take on more loans including the second Sh109 billion eurobond floated last year.

Earlier this year, Treasury Cabinet Secretary Ukur Yatani said that the government will soon have to expand the borrowing limit if it is to fund operations and meet its obligations.

“The formulation of this strategy has been on a background of public debt stock fast approaching the statutory ceiling of Sh9 trillion as set out in the Public Finance Management Act 2012,” saidCS Yatani in the latest medium debt management strategy.

“As a result, the implementation of this strategy may require the revision of the debt ceiling through the amendment of the PFM Act based on future borrowing requirements.”

However, the proposal that comes months to a general election has divided Members of Parliament with some terming the move as futile in cutting the government’s appetite for debt.   

“What other options do we have apart from rising the debt ceiling because we did this in 2019 and yet here we are again three years facing debt distress?” Makueni Senator Mutula Kilonzo asked.

In her presentation to the Senate Committee, the Auditor General revealed that the government has taken on an additional Sh293 billion in loans from both bilateral and multilateral lenders between the months of April and August 2021.

This includes Sh110 billion from Citi Group Global Markets Europe, Sh13.8 billion from the World Bank, Sh2 billion from the International Fund for Agriculture Development, Sh2.2 billion from Saudi Arabia and Sh1.2 billion from the Government of Belgium.

The AG blamed the National Treasury’s unrealistic budgeting for the runaway expenditure that does not take into account revenue performance, forcing the government to turn to the debt market to cover shortfalls.

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