Debt burden to worsen Kenya’s economic woes
Kenya’s debt portfolio has once more focused the spotlight on the country’s ability to sustain economic growth as all sectors threaten to grind to a halt because of the Corvid-19 pandemic shocks.
A glance at the Economic Survey 2020 raises fundamental concerns on Kenya’s debt-for-equity a year after the Senate gave the green light to raise Kenya’s debt ceiling to Sh9 trillion, potentially plunging the country deeper into debt.
This gave the National Treasury leeway to borrow up to Sh2.5 trillion, in addition to the current debt of Sh6.5 trillion, bringing the indebtedness of every Kenyan to Sh190,000.
The government sought to raise the ceiling after it hit its limit, but needed to borrow more to pay some of the loans that will fall due soon.
Kenya has been calling for debt waivers to help it direct more resources to fighting the coronavirus pandemic and sustain growth.
As at June 2019, the total stock of public debt stood at Sh5.3 trillion, with external debt accounting for 57 per cent of the total debt stock.
In 2019/20 financial year with a total of Sh40.8 billion expected to be spent on public debt servicing.
Unfortunately, this comes on the back of National government expenditure growth of 10.6 per cent to Sh3.26 trillion from Sh2.94 trillion spent in 2018/19.
Recurrent and development outlays are estimated to grow by 3.0 per cent and 42 per cent, to Sh2.45 billion and Sh808.9 billion, respectively.
Treasury expects total revenue to grow by 21.4 per cent to Sh2.13 trillion which is now proving to be difficult with Covid-19 having started a global depression, forcing lockdowns and suspension of international flights.
Unfortunately, for Kenya, most sectors, including agriculture, tourism, manufacturing and ICT have not been growing as fast as projected last year.
Coming at a time the economy is reeling from the effects of drought and locust infestation, dealing with debt will be difficult for Kenya even post Covid-19, particularly in the next financial year.
It appears the only option the government has is to go for more debt and cut down on spending and hope the economy will grow hence the need for a structured austerity plan in all levels of the economy.