Public debt races past Sh7tr as State fights coronavirus
Lewis Njoka @LewisNjoka
Kenya’s public debt has crossed 7 trillion mark, latest data from the Central Bank of Kenya (CBK) shows.
This means the country gobbled up Sh1 trillion additional debt on the back Covid-19 pandemic as government came up with various stimulus packages to cushion the economy and check the spread of the virus.
Data in CBK’s weekly bulletin released on Friday shows the country’s total public debt stood at Sh7.068 trillion in August up from Sh6.91trillion in July.
The data reveals massive borrowing between March and August, a phenomenon that could be partly attributed to Covid-19 related borrowing.
Over the period, the country borrowed a total of Sh782.75 billion of which Sh329.07 billion was from domestic sources and Sh453.69 from external sources.
The period between March and June saw government borrow the heaviest this year gulping Sh303.18 billion externally and Sh105.33 billion internally.
It signifies a Sh5.29 trillion jump in public debt since March 2013 when the current Jubilee administration came to power.
Economic analysts have warned that the ballooning public debt could soon become unmanageable.
Samuel Nyandemo, a senior economics lecturer at the University of Nairobi described the country’s public debt situation as alarming, saying it was disappointing that the government had borrowed heavily locally.
“These debts are massive to the point that they are going to overwhelm the country.
They are pushing us to the debt trap where we are going to use a huge chunk of our revenue collection to service the debts. And that does not augur well for capital expenditure,” he said.
He said heavy domestic borrowing by the government had suffocated cash ratios making loans expensive and crowding out private investors from the local credit market.
Nyandemo said there was a need for Parliament to revise the borrowing ceiling so that it reduces the window available for the government to borrow.
Analysts at Genghis Capital estimate that Kenya’s public debt will hit the Sh9 trillion ceiling by the year 2022 if the current rate of borrowing is sustained.
They said the decline in revenues and mounting public debt could make Treasury to abandon austerity measures targeted last year.
“We opine that the Sh9 trillion public debt ceiling will be attained within financial year 2022/23.
That said, there is scope of hitting the ceiling in financial year 2021/22 if trends in recent fiscal years – where borrowing is revised upwards in mid-year budget revisions – is anything to go by,” Genghis said in a note to investors.
They said for the current fiscal year the initial net financing quantum, which is the amount of funding needed to repay debt that falls due, was Sh841.1 billion although this is likely to rise to Sh951.4 billion.