Kenya to spend Kshs 300B to service debts

By O’Brien Kimani

Kenya will spend 300 billion shillings in the 2017/2018 fiscal year to repay her domestic and external debtors.

The bulk of the funds will go towards servicing local debts at 210 billion shillings while external debtors will chalk up the rest.

National Treasury Principal Secretary Kamau Thuge has further allayed fears that Kenya’s debt position is getting to tipping point saying it remains within the government’s medium term target of 50 percent of the country’s wealth.

According to the International Monetary Fund debt sustainability report for 2016, Kenya’s risk of external debt distress remains low, while overall public sector debt dynamics continue to be sustainable.

The country has been on a borrowing spree from the domestic to the international markets and from floating international papers like the Eurobond to selling government papers like treasury bills and bonds.

This has raised eyebrows as to whether Kenya’s is a viable project. The opinion is highly divided from the politicians to policy setters.

Kenya’s public debt as of December 2016 was 3.8 trillion shillings or 52 percent of Kenya’s economy.

Government Debt to GDP in Kenya averaged 54.06 percent from 1998 until 2015, reaching an all-time high of 78.30 percent in 2000 and a record low of 42.80 percent in 2008.

PS Thuge says Kenya has religiously serviced her debts making the county an attractive borrower on the international and domestic market.

Kenya’s gross domestic public debt was 26 percent of GDP at the end of 2015. Domestic debt is issued mostly in the form of Treasury bonds at 66 percent of domestic debt and Treasury bills at 32 percent.

In the financial year 2017/2018 the public will cough out 300 billion shillings to repay these loans plus interest.

The bulk of the external public debt carries concessional terms, which means that they are offered at lower markets rates and are long term in nature.

The National Treasury expects improved revenue collection and a six percent economic growth to lower Kenya’s appetite for loans.

In 2017/2018 the government plans to borrow 544 billion shillings for capital expenditure.