Why Kenyas’s debt will increase to 7 Trillion by 2022

Kenya’s public debt is projected to hit Sh7 trillion by the time President Uhuru Kenyatta exits State House. And a report by National Treasury Cabinet Secretary Henry Rotich shows the country’s debt burden will hit Sh5.6 trillion by June next year.

The annual Public Debt Management Report was tabled in the National Assembly by Leader of Majority Aden Duale.

The report further shows that national debt as at June this year – both domestic and foreign – stood at Sh5.1 trillion. Domestic debt stands at Sh2.5 trillion while foreign debt has hit Sh2.6 trillion. The country has received Sh559.1 billion from China, Sh101.9 billion from Italy and Sh34.7 billion from Germany.

Other creditors are Belgium who gave Sh10.2 billion and the US (Sh2.9 billion). International Development Association (IDA) has also contributed to the debt burden by loaning the country Sh516.8 billion; African Development Bank (AfDB) has extended a Sh204.8 billion facility while International Monetary Fund (IMF) has given a Sh71.6 billion loan.

But with concerns of the country’s debt sustainability, Mr Rotich has maintained that the country is not badly off as gross domestic product expanded by 4.9 per cent in 2017 compared to 5.9 per cent in 2016. He says the economy has remained “resilient despite multiple shocks arising from the prolonged drought, electioneering period and global economic slowdown”.

he debt burden and dwindling revenue streams have put pressure on major capital projects as the Government struggles to source funds through new tax measures that have hit Kenyans hard. The President last month cited a Sh67.5 billion funding gap for his decision to reject the Finance Bill 2018.

Uhuru said the revenue shortfall would cause major paralysis in Government operations and returned most of the tax measures that were rejected by the MPs. The report indicates domestic debt increased from Sh2.1 trillion in 2017 to Sh2.5 trillion in June 2018, representing 49.1 per cent of the country’s debt.

External debt, which includes guaranteed debt, increased by 12 per cent from Sh2.3 trillion in June last year to Sh2.6 trillion in June this year, representing 50.9 per cent of the total debt. According to Treasury, the increase was as a result of a Sh200 billion International Sovereign Bond.

The money was borrowed in the last financial year to finance major infrastructure projects, but has remained controversial after the Government failed to explain how it was spent.


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