Kenya’s debt service costs are projected to cross the Sh1 trillion mark this financial year and double to Sh2.1 trillion in four years, projections by the National Treasury showed, underlining the growing burden on the budget.
The debt is estimated to hit Sh9.4 trillion by June 2023.
An annual public debt management report says the public debt will climb from Sh8.58 trillion by June to Sh10.1 trillion within two years.
This will rise alongside costs to service the domestic and external debts from Sh945 billion in the year to June 2022 to Sh1.19 trillion during the current financial year. The Treasury projects that by June 2026, the amount will have doubled to over Sh2 trillion.
“The debt service stood at Sh945.081 billion (49.2 percent of revenue) and is projected to increase to Sh2,123,476 million in the financial year 2025/26 (64.9 percent of revenue),” it stated.
The projection by Treasury implies that between July and June next year, the government will spend upwards of Sh3.26 billion daily to service debts on average, up from the Sh2.59 billion during the financial year to June.
This will grow the public debt service burden by Sh246.9 billion (or by 26.1 percent), equivalent to an average extra burden of Sh676.5 million daily. This is after growing by 17.6 percent from the Sh780.6 billion spent on debt service in the year to June 2021.
The Treasury noted debt service will grow as more instruments mature, with 11.6 percent of the Sh4.1 trillion external debts by June expected to be due within four years while another 23.6 percent of the external debts will mature between five and 10 years.
“Similarly, debt service as a percentage of GDP is projected to decrease to 7.3 percent in the financial year 2025/26 from 7.4 percent in 2021/22,” the Treasury stated. Kenya’s debt burden crossed the Sh8.61 trillion mark for the first time in July, according to the Treasury even as the government kick-started the race to source loans to fund the 2022/23 budget.
The Sh3.3 trillion budget has a financing deficit of Sh862.5 billion, which the Treasury plans to plug through local borrowing of Sh581.7 billion and external debt of Sh280.7 billion.