Kenya’s Public Debt Hits KSh 10.5 Trillion

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According to a report presented to Parliament by the Treasury this week, the government secured loans amounting to KSh 303.2 billion in June 2024 alone.

Kenya's Treasury Building. Photo by Business Daily.

By Robert Mutasi

The country’s public debt currently stands at a record KSh 10.5 trillion on the back of increased borrowing by the government.

According to a report presented to Parliament by the Treasury this week, the government secured loans amounting to KSh 303.2 billion in June 2024 alone.

The multilateral and bilateral loans are to finance flagship development projects in health, energy, and micro, small, and medium enterprises.

This new borrowing has extended the country’s debt woes by about three months.

According to the Treasury report, external debt now accounts for 48.9% of Kenya’s total debt, at KSh 5.171.7 billion.

The balance of KSh 5.410.3 billion is domestic debt, a trend that the country is leaning toward to meet the government’s financial obligations through domestic borrowing.

This increase in borrowing comes as the government works to ensure the completion of major development projects amidst slow economic growth.

These funds will be used in the construction and upgrade of infrastructure, with significant expected activity in healthcare, energy, and MSMEs.

Treasury officials have said the loans are necessary for momentum in these sectors, crucial to long-term Kenyan economic aspirations.

While the government has justified the borrowing as crucial for the country’s development, there is growing alarm about the trend of Kenya’s debt levels.

Analysts warn that such a widening debt-to-GDP ratio will weigh down future revenues of the government especially when its cost of servicing debt rises significantly.

Debt-servicing requirements for the government are expected to rise in 2024 and further squeeze the national budget.

On the contrary, government-guaranteed debt declined significantly from KSh 170.2 billion as of June 2023 to KSh 100.2 billion as of June 2024.

This cut is owing to the novation of Kenya Airways’ debt, one of the efforts to restructure that burden and thus ease the state’s financial obligations toward the troubled airline.

This decline in government-guaranteed debt notwithstanding, Kenya’s general trend of debt growth continues to raise concern both domestically and internationally.

Analysts are urging the Kenyan government to implement fiscal consolidation measures with a view to breaking its dependence on heavy borrowing and securing the stability of the economy in the long run.

As Parliament debates the Treasury report, stakeholders in the economy will keenly await the next government move in managing its growing national debt burden while trying to achieve its development objectives.

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