Hard times as Kenya’s debt hits a record Sh8.61trn
Kenya’s debt hits a record Sh8.61trn and is projected to hit Sh9.8 trillion by the close of this financial year, June 2023.
According to recent National Treasury filings, Kenya’s debt load first surpassed the Sh8.61 trillion threshold in July.
This is taking place even as the government starts the scramble to find loans to pay for the budget for the current fiscal year.
In the month of July, the country’s external debt climbed by Sh9.04 billion to Sh4.299 trillion, driven by fresh exchequer payments and the local currency’s decline against the major world currencies.
In July, the Treasury paid back Sh25.75 billion of China’s debt, along with Sh530 million and Sh891 million to Spain and France.
Additionally, it got funding totaling Sh4.52 billion from Japan, Sh3.47 billion from the Asian Development Fund, and Sh27.82 billion from the International Monetary Fund.
The government also borrowed Sh103.83 billion locally through Treasury bills and bonds during the month.
“The total nominal public and publicly guaranteed debt stock as at the end of July 2022 was Sh8.61 trillion (68.1 percent of GDP). Domestic debt stock was Sh4.31 trillion (34.1 percent of GDP) while the external debt stock was Sh4.299 trillion (34 percent of GDP),” Treasury revealed.
The country’s Sh3.3 trillion 2022/23 budget has a financing deficit of Sh862.5 billion, which the Treasury plans to plug through local borrowing of Sh581.7 billion and external borrowing of Sh280.7 billion.
Kenya’s debt stock projection
The Parliamentary Budget Office (PBO) has stated that Kenya’s debt stock may reach Sh9.8 trillion by June of next year, which coincides with the Treasury’s disclosures.
This will leave the budget for 2023–24 with just Sh200 billion in borrowing capacity after the National Assembly set a limit of Sh10 trillion on the debt ceiling.
The use of borrowed money by the government has come under increased scrutiny, particularly when it comes to recurrent expenses like the illegal payment of salaries.
The government spent Sh162.2 billion of borrowed money on recurrent expenses in the fiscal year 2021/22, according to records, while the public salary bill substantially rises due to an increase in employment in the public sector of 923,100 workers in 2021.
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In the fiscal year 2021/22, which was former president Uhuru Kenyatta’s final full fiscal year in power, the government borrowed Sh916.6 billion.
However, according to Treasury data, it only used 82.3% (Sh754.2 billion) of the borrowed money for development and 17.7% (Sh162.2 billion) for ongoing expenses.
The buildup of debt repayments, the salaries, and wages of public employees, as well as a mounting pension burden have all contributed to the state’s recurrent expenditures expanding quickly in recent years.
From Sh1.82 trillion in the fiscal year 2020/21 to Sh2.13 trillion in the following year, there was a 17% increase in the total amount of recurrent spending.
“The recurrent spending was occasioned by spending interventions to cushion the poor and vulnerable members of society as well as to contain the spread of Covid-19 and acquisition of Covid-19 vaccines,” said Treasury.
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