Kenya’s public debt increased to Sh3.6 trillion for the year to September 2016, the National Treasury says in its Quarterly Economic and Budgetary Review.
The country’s total external debt stock, including the International Sovereign Bond, stood at Sh1.7 trillion at the period ending September 2016. The debt stock comprised of multilateral debt (42.0 per cent), bilateral debt (31.6 per cent), Suppliers Credit debt (0.5 per cent), and Commercial banks’ debt (25.9 per cent including International Sovereign Bond).
On the other hand, total gross domestic debt stock increased by 33.6 per cent from Sh1.4 trillion as at end-September 2015 to Sh1.9 trillion by the end of September 2016.
Between July 2016 and September 2016, external financing amounted to a net borrowing of Sh39.2 billion, the review report says.
Net domestic financing amounted to a net borrowing of Sh49.4 billion (equivalent to 0.7 per cent of GDP) in the period ending 30th September 2016.
The cumulative overall fiscal balance, on a commitment basis (excluding grants), amounted to a deficit of Sh74.0 billion (equivalent to 0.99 per cent of GDP), as at the end of September 2016.
The review shows that between July 2016 and September 2016, the National Government paid a total of Sh163.5 million on account of guaranteed loans against the projected debt service of Sh156.1 million.
During a visit to Kenya between October 19 and November 3 this year, a team from the International Monetary Fund (IMF), led by Benedict Clements, urged the government to be prudent to maintain the sustainability of public debt on a sustainable path, contain inflation within the target range, and preserve external stability.
They called on the government to maintain the fiscal deficit on a declining path as envisaged under Stand-By Arrangement and a Stand-By Credit Facility (SBA/SCF) it entered into with the Bretton Woods institution.
The Opposition has also previously put the government on the spot over its accelerated borrowing to fund infrastructural projects.
Last week, during the signing of an agreement for phase one of the upgrading Kibwezi-Mutomo-Kitui highway at a cost of Sh23 billion with China’s Exim Bank, Treasury Cabinet Secretary Henry Rotich revealed that the Asian Nation alone has lent the country Sh539 billion, making her Kenya’s largest bilateral development partner.
However, Treasury officials have insisted the public debt is within manageable levels.
But similar concerns were expressed by the World Bank, which noted that although public debt remains sustainable, margins for manoeuvre are rapidly narrowing.
The cost of financing the public debt is set to go up next year. According to the Division of Revenue Bill, annual debt repayment will reach Sh618.5 billion in 2017 with analysts saying it is tantamount to Treasury spending an estimated Sh40 out of every Sh100 collected from taxpayers on servicing the ballooning loans.
The repayment bill represents a 38.5 per cent jump from Sh446.4 billion spent on public debt this year compared to a projected 12 per cent growth in tax collection.
According to the review, revenue collection fell with National Government cumulative collection including Appropriation-In-Aid for the period July 2016 to September 2016 amounting to Sh313.6 billion (equivalent to 4.2 per cent of GDP) against a target of Sh328.0 billion or 4.4 per cent of GDP. This represented an underperformance of Sh14.4 billion mainly due to shortfalls in Income Tax (PAYE), A-I-A collection, VAT (Imports) and Import duty.
The economy, however, remained resilient in 2016 with a growth of 6.2 per cent in the second quarter of 2016 compared to a growth of 5.9 per cent in the first quarter of 2016, which was an improvement from the 5.6 percent growth in 2015.
The growth in the second quarter of 2016 was largely supported by growths in agriculture, mining, electricity and water supply, transport and storage, accommodation and restaurant and information and communication.