Kenya’s Debt Skyrockets, Surpassing Forecasts
Kenya’s national debt witnessed a significant surge of 18.8% in a year, escalating from KSh 8.63 trillion in June 2022 to KSh 10.25 trillion in June 2023.
This increase overshoots the KSh 10.13 trillion mark that was projected by the National Treasury for June 2024. This substantial rise in debt is attributed primarily to increased borrowing by the administration of President William Ruto and the depreciating Kenyan shilling.
President Ruto’s administration borrowed in excess of KSh 1 trillion. In the last nine months of the fiscal year 2022/2023 alone, the government’s borrowing amounted to KSh 1.43 trillion, making up 91.52% of the total debt.
The borrowing became necessary due to the shortfall in tax collection revenues. International lenders, such as the World Bank, International Monetary Fund, and African Development Bank, provided KSh 1.06 trillion in loans.
Domestic vs External Lenders: A Closer Look at Kenya’s Debt Stock
The Controller of Budget, Margaret Nyakang’o, released a report revealing a detailed breakdown of Kenya’s debt stock.
As per the report, Kenya owes KSh 4.83 trillion to domestic lenders and KSh 5.42 trillion to external lenders.
The country’s development expenditure saw a 14.4% drop compared to KSh 553.37 billion spent in FY 2021/22. The recurrent expenditure data shows that KSh 551.44 billion was spent on grants, and KSh 542.46 billion was spent on employee compensation.
Scrapping the Debt Ceiling: Response to the Rising Debt
In light of the escalating debt, Kenyan Members of Parliament made a significant move by abolishing the KSh 10 trillion debt ceiling. The Public Debt and Privatisation Committee approved the debt anchor on a percentage of the Gross Domestic Product (GDP) borrowing threshold.
This change in policy allows the government to borrow up to 55% of the GDP to fund the KSh 3.6 trillion budget.
Kenya’s national debt has witnessed a dramatic increase, surpassing the projected mark due to increased borrowing by the current administration and the depreciating value of the Kenyan shilling.
In the last nine months of the 2022/2023 financial year, government borrowing accounted for 91.52% of the total debt, primarily because of a shortfall in tax collection revenues. In response to the burgeoning debt, the debt ceiling was scrapped, allowing the government to borrow up to 55% of the GDP.
Navigating the Future: Kenya’s Fiscal Challenges
As the Kenyan government continues to grapple with the rising national debt, it remains to be seen how this situation will be managed in the long term.
The decision to remove the debt ceiling and permit increased borrowing is a significant step, but it also raises questions about sustainability and economic stability.
As the country navigates these fiscal challenges, the strategies adopted to manage the national debt will have far-reaching implications for its economic future.
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