Kenya’s debt grows 6 times over in 7 years: Report
The stock of the country’s debt has grown by over six times in a short seven years between 2013 and 2020 according to a new report.
The report by titled ‘Kenya’s Public Debt Profile’ by the Institute of Public Finance Kenya and which was published on Thursday draws its findings from a deep dive of data available at the National Treasury.
During the seven year window stretching from June of 2013 to December 2020, Kenya has accumulated Ksh.5.458 trillion in debt.
This is more than six times the amount accumulated under three previous administrations covering years from independence in 1963 to the end of 2012.
At the same time, the report shows that public debt accumulation in the seven years has been double that of nominal GDP.
This means as the the economy expands by Ksh.1 trillion in a year, debt has in contrast edged upwards by Ksh.2 trillion in the same window.
The findings from the report serve to affirm Kenya’s growing risk of debt distress as cited earlier by institutions such as the International Monetary Fund (IMF).
The stock of debt between at the end of June last year hit Ksh.6.7 trillion from Ksh.1.94 trillion in June of 2013 representing a 253.4 per cent surge in debt accumulation.
External debt in the period has moved from Ksh.843.6 billion to Ksh.3.5 trillion, a four time expansion, while domestic debt has grown by nearly three fold from Ksh.1.1 trillion to Ksh.3.2 billion.
Big ticket infrastructure projects such as the Standard Gauge Railway (SGR) have gobbled up the bulk of loans taken.
In the most recent, the COVID-19 pandemic has escalated the pace of borrowing to cushion against a drop in domestic revenues.
The Institute of Public Affairs in Kenya has warned of increased external borrowing which has risen to more than 34 per cent of GDP from a low 18.8 per cent in 2013 citing fiscal and FX risks.
“The accumulation of external debt poses a high risk of debt distress particularly in Kenya where primary exports are declining coupled with exchange rate volatility. This affects the inflow of the foreign exchange necessary to repay the external debt. In most cases, governments are forced to borrow to retire debts,” noted the report.
At the same time, public debt service has been on the rise largely from high costs for domestic debt.
In its recent country report, the IMF warned of an increased risk for debt distress in Kenya citing a weakened debt carrying capacity.
Analysts at the Public Finance Institute have partly blamed the lack of proper oversight on public debt management for the elevated debt risks.
“Right now, the National Assembly is an extension of the Executive in the sense that what the executive wants will always sail through Parliament. There is a Parliament captured by the Executive.”
The report recommends increased transparency and accountability in managing the stock of debt including the opening up of the public debt registry to Kenyans and an audit of borrowed funds.
Further, the report calls for a cost-benefit analysis for projects undertaken through borrowed funds.
In June this year, Kenya’s stock of public debt reached Ksh.7.7 trillion and is now only Ksh.1.3 trillion shy of the prescribed Ksh.9 trillion debt ceiling.
Across the 2020-21 financial year to June, Kenya borrowed Ksh.1.2 trillion representing an equivalent borrowing rate of Ksh.3.2 billion a day down from Ksh.2.4 billion daily previously.