Fact-Check: Kenya’s debt situation not worse since handshake as Ruto claims


President Kenyatta and Deputy President William Ruto when they unveiled their Cabinet at State House, Nairobi in April 2013 [File, Standard]

Deputy President Dr William Ruto, while accepting his nomination by the United Democratic Alliance (UDA) Party to vie for the presidency at Kasarani Stadium on Tuesday, claimed the truce between Azimio la Umoja leader Mr Raila Odinga and President Uhuru Kenyatta had plunged the country into debt of up to Sh7.5 trillion since the handshake in March 2018.

“It is a tragedy that we must investigate,” he said. But did the country actually incur Sh7.5 trillion since April 2018 when Uhuru-Odinga marriage was consummated with a handshake?

Data from the Central Bank of Kenya (CBK) shows that the public debt stands at Sh8.2 trillion as at the end of December 2021.

It has incurred around Sh6.3 trillion in loans since 2013 when President Kenyatta and his deputy Dr Ruto came to power, according to data from the Central Bank of Kenya (CBK). It was at Sh1.9 trillion by the time former President Mwai Kibaki’s budget came to an end in June 2013.

By April 2018 it was at Sh5 trillion, an increase of 163 per cent.

Between April 2018 and December 2021, it increased by 64 per cent to Sh8.2 per cent.

But Ruto has been quick to dissociate himself from the second term when Kenya had a mongrel of government with confusion as to who is government and who is in opposition.

He blames this on the handshake between President Kenyatta and Mr Odinga who had détente in 2018 after a bruising poll in 2017.

“I didn’t appoint no (any) minister anywhere. Everybody was appointed by the president,” said Dr Ruto, who added that he only played the DP role in their first term.

“Unfortunately, in our second term, because of the political dynamics that came into play, the president told me that he wanted to do things differently. He didn’t want what had become normal in Kenya as ‘UhuRuto’, he wanted ‘Uhuru’,” he added, saying that Uhuru had wanted the second term to be about his legacy.

Assuming that that what Dr Ruto is saying is true, then how does the dynamic play out in the two periods when he was allegedly in government and when he was out of government? In the first term, when Mr Kenyatta and his deputy, Dr Ruto were in good terms, the government borrowed Sh3.07 trillion for various projects including the building of the Standard Gauge Railway, roads and other mega projects.

Between April 2018 when Mr Odinga and Mr Kenyatta shook hands outside Harambee House, and December 2021 when data is available, Kenya incurred a debt of Sh3.23 trillion.

To that end, there was indeed more borrowing that happened during the handshake period compared to the first term of UhuRuto.

And this debt is likely to keep rising with the government expected to borrow more.

In total, President Kenyatta’s administration has accumulated a total of Sh6.3 trillion since 2013. Ruto did not explain where he got the Sh7 trillion.

In his address to UDA’s National Delegates Convention at Kasarani, Dr Ruto insisted that the huge loans should be investigated.

It is not clear what should be investigated. However, some seven years ago, it was his nemesis, Mr Odinga who called for the investigation of one loan - Kenya’s first Eurobond which was issued in 2015.

According to Mr Odinga, not all of the Sh120 billion that Kenya raised in its debut Eurobond reached the Kenyan shores, arguing that the money was stolen.

Former Auditor General Edward Ouko noted that while the money came into the country, he could not trace its spending.

For long, there has been no obligation to show where the Eurobond would be spent. The country was only required to state the purpose for the borrowed cash, which in most cases was indicated as budgetary support and infrastructure.

But there are several levels to the country’s debt beyond just the absolute numbers like Sh7 trillion being borrowed.

You can have a debt of Sh8.2 trillion but have an economy of Sh200 trillion which then means that you are collecting a lot of taxes. That means that it will be much easier for you to repay the debt.

However, if the economy is not growing and thus not collecting enough taxes, paying debt will be difficult.

That is why, as far as debt is concerned, it is critical to look at public debt as a percentage of the total size of the economy, or gross domestic product (GDP). And even more critical, it is critical to look at debt service as a percentage of GDP.

So, between 2013 and 2018 and 2018 and 2021, when was Kenya’s debt very expensive?

By end of 2018, the external debt service to GDP rose from one per cent in June 2013 to 3.5 in June 2019. Another measure of debt sustainability is by looking at the fraction of external debt service as a fraction of total value of goods and services exported.

This is because your export earnings are the main way through which you get foreign currency to repay your foreign loans. So, when your foreign debt payments grow faster than your export earnings, that is a red alert.

Previously, there was Sh3.4 for every Sh100 that the country earned from its exports. This rose to Sh31.6 in June 2019 before it went down to Sh21.5 in June 2020.

This then dropped to 2.1 per cent in June 2021, and is expected to decline further even though the country debt has shot up.

The decline is due to the billions of cheap loans that Kenya received from the World Bank, International Monetary Fund, and African Development Bank at the height of Covid-19 period.

But why would debt service be high during the first term of Uhuru? Because the country was also incurring very expensive loans with high interest charges with no grace periods and shorter tenors.

These are loans such as the syndicated loans from banks with interest rates of as high as 10 per cent. They also have shorter tenors and almost no grace periods.

And, if Dr Ruto is talking about investigations, then these are the loans that need to be probed because for long, their terms were hidden from public scrutiny when Dr Ruto was still a key partner in government. To the credit of current Treasury boss Ukur Yatani, he is yet to take a syndicated loan.