Public debt hit Sh10.58 trillion in September, with the National Treasury revealing that both domestic and external liabilities have risen rapidly under the government.
The elevation of the public debt points to a sustained borrowing appetite by the Kenya Kwanza government and the impact of the weakening shilling against foreign currencies.
The debt levels have grown at a time when the National Treasury has acknowledged Kenya’s headroom for more public borrowing is narrowing in a move expected to pile pressure on the taxman to raise funds for servicing public debt. “As of September 31, 2023, Gross Public Debt increased by Sh310.0 billion to Sh10.58 trillion compared to Sh10.27 trillion at the end of June 2023,” said National Treasury Principle Secretary Chris Kiptoo in a presentation before the National Assembly’s Public Debt and Privatisation Committee.
Dr Kiptoo said the Gross Public Debt comprises Sh5.66 trillion (53.5 per cent) external debt and Sh4.92 trillion (46.5 per cent) domestic debt. “The depreciation of the Kenya shilling has been the primary driver of nominal growth of external debt,” he said. The local currency hit an all-time low against the dollar yesterday, setting up the government for further debt servicing distress. It has weakened by nearly 20 per cent against the dollar since the start of the year.
According to Central Bank of Kenya (CBK) data, the shilling exchanged at an average of 151.6794 against the dollar – a record low.
Kenya’s sovereign loan repayments have been rising faster than collections of tax revenues in recent months, National Treasury disclosures show, signalling the country could be headed for a fresh debt crisis.
The lagging revenues against the pending urgent debt obligations highlight mounting concerns about the strength of the economic recovery and the government’s ability to sustainably service upcoming debt repayments, including the $2 billion (Sh302 billion) Eurobond.
On Thursday however, President William Ruto finally revealed a much-awaited plan to pay off the Eurobond.
“Our efforts to stabilise the situation have yielded such progress that next month, in December, we will be able to settle the first $300 million (Sh45 billion) instalment of the $2 billion Eurobond debt that falls due next year,” he said in his State of the Nation address in Parliament.
“I can now state with confidence that we will and shall pay the debt that has become a source of much concern to citizens, markets and partners.”
The Kenya Kwanza administration has been betting on the Kenya Revenue Authority (KRA) to ramp up collections to support debt servicing alongside the daily running of crucial programmes such as health and education or building new roads.
There have been concerns that rising debt servicing costs are squeezing funding for economic development, hindering the Kenya Kwanza administration from implementing its development programmes.
Treasury Cabinet Secretary Njuguna Ndung’u earlier said this is compounded by lower-than-expected revenues, which could impact the government’s ability to deliver on its ambitious bottom-up promises.