Hard times as Kenya’s debt service fee to hit Ksh 1 trillion mark
Kenya’s debt service fee to hit Ksh 1 trillion mark underlining the growing burden on the budget amid hard economic times.
According to predictions by the National Treasury, Kenya’s debt service payment costs are expected to surpass Sh1 trillion this fiscal year and double to Sh2.1 trillion in four years, highlighting the mounting pressure on the budget.
By June 2023, the debt is anticipated to reach Sh9.4 trillion.
According to an annual report on public debt management, the public debt will increase from Sh8.58 trillion by the end of June to Sh10.1 trillion over the next two years.
Along with debt payment expenses, this will increase from Sh945 billion in the fiscal year ending in June 2022 to Sh1.19 trillion in the current financial year.
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According to Treasury estimates, the sum will have risen to more than Sh2 trillion by June 2026.
“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.
According to Treasury’s prediction, the government will pay an average of Sh3.26 billion per day to service debt between July and June of next year, up from Sh2.59 billion during the fiscal year up to June.
This will result in an increase in the public debt service burden of Sh246.9 billion (or by 26.1 percent), or an additional burden of Sh676.5 million each day on average. This comes after spending on debt servicing increased by 17.6% from the Sh780.6 billion paid in the year ending in June 2021.
The Treasury stated that as additional instruments mature, debt service will increase. By June, 11.6 percent of the Sh4.1 trillion in external debt was scheduled to be due within four years, and another 23.6 percent will mature between five and ten 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.
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