State-secured debt rises by Sh13bn on weak shilling
Kenya’s public debt shot up by Sh1.93 trillion in the year ended December 2023.
What you need to know:
- Data from the Controller of Budget shows that State-guaranteed debt hit Sh183.08 billion in December last year.
- More than half of this debt was borrowed by Kenya Airways, which is currently creaking under a heavy debt load.
The value of debt taken by State corporations, but will be repaid by taxpayers in case they default, increased by 7.5 per cent in the six months to December 2023 driven by depreciation of the Kenyan shilling against the US dollar.
Data from the Controller of Budget (CoB) shows that State-guaranteed debt hit Sh183.08 billion in December last year. This is an increase of Sh12.85 billion from June 2023.
“As of December 31, 2023, the guaranteed debt stock stood at Sh183.08 billion compared to Sh170.23 billion as of June 30, 2023 with the increase attributed to the depreciation of the Kenya shilling against major foreign currencies,” said CoB.
The debt was taken by just three State-owned companies namely national carrier Kenya Airways (KQ), the Kenya Electricity Generating Company (KenGen) and the Kenya Ports Authority (KPA).
More than half (50.4 per cent) of this debt (Sh92.29 billion) was borrowed by KQ, which is currently creaking under a heavy debt load.
The airline already defaulted on part of the State-guaranteed debt which it took from the Exim Bank USA in 2017. The government is now servicing this debt.
In the current financial year, which ends in June, the allocation towards payment for guaranteed debt was Sh17.19 billion which was later revised to Sh18.92 billion in Supplementary Budget I.
The total amount paid on guaranteed loans during the first six months of the 2023/24 fiscal year amounted to Sh6.85 billion.
This was payment for the KQ guarantee with Sh5.46 billion being the redemption of loan and Sh1.39 billion being interest, underlining the risk that the guarantees pose to taxpayers.
Some 18.8 per cent of the State-backed debt (Sh34.37 billion) was taken by KPA in 2015 from Japan to fund the second phase of the Kenya Port Development Project.
A further Sh22.6 billion had been taken in 2007 by the agency from Japan to fund the first phase of the project. KPA also borrowed two loans totalling Sh753.29 million from the Asian giant in 2021.
The guaranteed debt also includes Sh16.29 billion owed by KenGen. The loan was taken in 2010 from Japan to build the Olkaria I Unit 4 and 5 geothermal power plants.
The company took several other loans totalling Sh16.7 billion across a period of nearly three decades from Japan and Germany to fund various power generation projects across the country.
