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Happening Now: Earthwise Summit 2024

Public debt burden to hit Sh5.6 trillion

What you need to know:

  • As at June this year, the national debt stood at Sh5.1 trillion of which Sh2.5 trillion is domestic and Sh2.6 trillion external.

  • But Mr Rotich said despite public outrage over the government's borrowing appetite, the GDP expanded by 4.9 per cent in 2017 compared to 5.9 per cent in 2016.

Kenya's public debt is expected to hit Sh5.6 trillion by next June and about Sh7 trillion in 2022 when President Uhuru Kenyatta will complete his second and final term.

This is according to this year’s annual public debt management report by Treasury Cabinet Secretary Henry Rotich tabled in the National Assembly yesterday.

It shows that as at June this year, the national debt stood at Sh5.1 trillion of which Sh2.5 trillion is domestic and Sh2.6 trillion external.

Among the leading external lenders who have contributed to the debt burden include China with Sh559.1 billion, Italy Sh101.9 billion, Germany Sh34.7 billion, Belgium Sh10.2 billion and US Sh2.9 billion.

PUBLIC OUTRAGE

Others are the International Development Association (IDA) Sh516.8 billion, Africa Development Bank (ADB) Sh204.8 billion and International Monetary Fund (IMF) Sh71.6 billion.

But Mr Rotich said despite public outrage over the government's borrowing appetite, the country’s Gross Domestic Product (GDP) expanded by 4.9 per cent in 2017 compared to 5.9 per cent in 2016.

“The economy remained resilient despite multiple shocks arising from the prolonged drought, electioneering period and global economic slowdown,” Mr Rotich said adding; “growth was mainly attributed to improved weather conditions, stable business environment and consumer confidence.”

MANUFACTURING

The increase in the public debt has put pressure on the economy with key infrastructure projects such as roads, electricity, water and other basic provisions at risk of suffering budget cuts.

To compound the challenge, the government has been experiencing a slump in revenue collection both in 2017/18 and the current financial year, forcing it to slash its Sh3.026 trillion budget for the current financial year by Sh37 billion.

The government has also increased taxes on basic commodities to finance its recurrent and development priorities, raising the cost of living and threatening the country’s competitiveness in the manufacturing sector and the cost of doing business in the region.

CUSHION POOR

Mr Rotich was upbeat about the debt situation, saying it is within sustainable levels. He sought to assure the country that during the 2017/18 financial year, Kenya’s public debt remained below the 50 per cent Gross Domestic Product.

As at the end of June this year, the outstanding total public debt, including what was publicly guaranteed, stood at Sh5.04 trillion compared to Sh4.4 trillion in 2017, while in 2017/18 it stood at Sh460.1 billion with external service standing at Sh220.6 billion and domestic at Sh239.5 billion.

Leader of minority in the National Assembly John Mbadi said the debt is risky to the economy and urged the government to cushion the poor against the high cost of living.

CHECK LEVELS

“Definitely something has to be done to check the levels of borrowing and ensure that the money is put where it is intended. You cannot borrow to pay salaries and later increase the taxes on the poor,” Mr Mbadi said.

The report notes that domestic debt increased from Sh2.1 trillion in 2017 to Sh2.5 trillion in June 2018, which is 49.1 per cent of the national debt.

External debt, which includes what has been guaranteed, increased by 12 per cent from Sh2.3 trillion in June 2017 to Sh2.6 trillion in June 2018 representing 50.9 per cent of the total public debt.