Correction and apology:
An earlier version of this story incorrectly stated that President William Ruto’s administration had borrowed Sh500 billion in its first three months in power. The correct figure is Sh137 billion borrowed between September and November last year, as per the latest Central Bank of Kenya report. We apologise for the error.
President William Ruto’s administration has borrowed more than Sh137 billion in three months since assuming office, recording an average monthly borrowing of Sh45.8 billion, in a period that has seen the new government rely more on the domestic market to finance revenue shortfalls.
A report by the Central Bank of Kenya (CBK) shows that the government borrowed a total of Sh137.48 billion in September, October, and November, the first three months of Ruto’s Presidency.
The new loans by the Kenya Kwanza administration translates to an average daily borrowing of Sh1.51 billion over the 91 days, with November recording the highest borrowing rate.
Between the start of the 2022/23 financial year in July 2022 and end of August, the government had borrowed a total of Sh82.27 billion, which rose to Sh219.75 billion by end of November.
President Ruto was sworn-in in September.
In September, the government took Sh50.42 billion in new debt, to see cumulative borrowing since July rise to Sh132.69 billion. During the month, only Sh50 million was borrowed from the domestic market, with the balance sourced from foreign creditors.
In October, new borrowing by the government was Sh21.85 billion, with close to Sh9 billion borrowed from the domestic market and Sh13 billion in foreign deficit financing.
The highest borrowing by the government was recorded in November when a total of Sh65.21 billion in new debt was procured, mainly from the domestic market.
In November, the CBK report shows, the government borrowed Sh70.5 billion from the domestic market, while debt accumulated from foreign financiers reduced by Sh5.29 billion. Average daily borrowings by the government through November were Sh2.17 billion, the highest over the three months.
Budget deficit financing is when a government spends more money than it receives as revenue, with the difference being made up by borrowing or other funding such as the sale of a stake in government agencies. No public agency has been privatised lately, meaning that the deficit was wholly financed through domestic and foreign debt.
“[It] includes public and publicly-guaranteed foreign currency loan inflows,” the report says on the government’s foreign borrowing.
Over the three months, the government borrowed more from the domestic market, than the foreign market. Borrowing from the domestic market was Sh79.2 billion (57.6 per cent of the new accumulated debt), while newly accumulated debts from foreign financiers constituted Sh58.28 billion (42.4 per cent).
“Deficit financing comprises external borrowing, domestic borrowing, and sales of government shares in government agencies (privatisation),” the report says.
The government did not privatise any of its agencies during the period, with the privatisation Bill having just been released this past week for public participation.
The report shows that Kenya’s public debt hit Sh8.89 trillion by November 2022 from Sh8.117 trillion in November 2021, a Sh781 billion increase.
Since assuming office, President Ruto has spoken openly against growing the public debt, indicating his objective was to grow government revenues and cut non-essential spending as a way to reduce budget deficits and slow down on borrowing.
The President has also been critical of President Kenyatta’s borrowing record, terming it unsustainable.
“We must stabilise our public finances. This year, we will spend 60 per cent of our revenues to service our debt. We are faced with Sh600 billion in pending bills for goods and services supplied to the government. Clearly, we are living beyond our means. This situation must be corrected,” the President said after his inauguration in September.
He later ordered a Sh300 billion cut on government expenditures in the 2022/23 budget, while he gave Kenya Revenue Authority targets to raise Sh3 trillion in revenues during the next financial year, up from the Sh2 trillion the authority collected in 2021/22.