Kenya’s debt will stand at Ksh.10.6 trillion in June 2025

Kenya’s stock of debt will have shot up to Ksh.10.6 trillion by the close of June 2025 according to estimates by the National Treasury.

This means that Kenya will have borrowed an additional Ksh.3.3 trillion adding to the current debt stock of Ksh.7.3 trillion at the end of December 2020 which implies a 45.2 per cent surge in new borrowing over the next five years.

The estimates contained in the 2021 Budget Policy Statement (BPS) reveal the impact of continued stay of significant budget funding deficits over the years.

The deficits in question have recently been exacerbated by the COVID-19 pandemic which trimmed the government’s ability to fund its spending from tax revenues alone.

Kenya’s current budget which runs to June 30, 2021 for instance reveals the impact of widening budget deficits to the overall growth in public debt.

Spending to June is estimated at Ksh.2.9 trillion to include Ksh.1.8 trillion in total revenues leaving a gaping hole in excess of Ksh.1 trillion.

Deducting grants from this deficit, Kenya will have borrowed Ksh.965.6 billion by the end of June to fill the shortcoming in tax revenues.

This will see the stock of debt rise to Ksh.7.7 trillion at the end of the 2020/21 financial year from Ksh.6.7 trillion in June 2020 signifying a Ksh.1 trillion to the gross stock of debt across 12 months.

IMF loan backlash

Kenya’s recently contracted Ksh.255 billion loan from the International Monetary Fund (IMF) makes up part of the deficit financing in the year to June.

While Kenyans have been up in arms protesting the approval of the 3-year loan to the IMF Executive Board, even more loans are lined up before the close of the fiscal year on June 30.

This include a Ksh.82.5 billion loan from the World Bank’s Development Policy Operations (DPO) and Ksh.123.8 billion from a fresh Eurobond issue.

In the next fiscal year, Kenya is still expectant of Ksh.74.3 billion in flows from the World Bank and a further Ksh.124.3 billion from the Eurobond (proceeds which may trickle from a single bond issue this year).

From the 2022/23 fiscal year, the bulk of loans is expected to stream from program specific facilities as proceeds from the World Bank DPO dry up in the year.

In June 2025, the Ksh.10.6 trillion debt stock will comprise of Ksh.4.8 trillion in external loans and Ksh.5.8 trillion in locally contracted debt.

The stock of debt will nevertheless be equivalent to 62 per cent of Gross Domestic Product (GDP) from the current 69 per cent of GDP.

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