– The country’s public debt (external and domestic) stood at a staggering Ksh 5.7 trillion in June 2019
– Among projects that have been gobbling up a lot of money include construction the Standard Gauge Railway
– Earlier, CBK Governor Patrick Njoroge hinted that the country had hit the borrowing headroom
– Parliament last week raised the borrowing ceiling to KSh 9 trillion from KSh 7.5 trillion proposed by a joint committee for finance and budget
– The international lender wants the government to focus on reducing the debt to GDP ratio from the current 62% to 55% in the medium-term
The World Bank has asked Kenya to cut down on its appetite for loans warning that Kenya was fast spiralling towards being a debt ridden country.
Ironically, the warning released on Wednesday, October 9 came on the same day the National Assembly raised the government’s borrowing ceiling to KSh 9 trillion.
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CBK Governor Patrick Njoroge had hinted that the country had hit the borrowing headroom. Photo: CBK.
Source: UGC
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According to the international lender, it was advisable for the government to install measures that will reduce the debt to GDP ratio from the current 62% to al least 55% in the medium term.
“It is important that future debt management adopt measures to ensure debt is not accelerating. One of the measures is to ensure that in the planned fiscal consolidation the government must stick to a path that seeks to reduce debt from 62% of GDP towards 55% in the medium term, “World Bank senior economist Peter Shacha was quoted by the East African on Saturday, October 12.
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The country’s debt (external and domestic) stood at KSh 5.7 trillion by June 2019 and pundits claim it may hit KSh 7 trillion by 2022.
The debt spiked owing to various infrastructural projects the government aims to complete, for instance, the KSh 150 billion Nairobi-Naivasha Standard Gauge Railway (SGR).
This came after the completion of the historic Nairobi-Mombasa SGR which was funded by Beijing to a tune of KSh 327 billion.
In a statement on Wednesday, May 29 the World Bank stated that it had also approved a KSh 75 billion loan to Kenya; funding it said was to improve the delivery of President Uhuru Kenyatta’s Big Four agenda.
This, however, comes as different economists and financial institutions continue to question the country’s ability to repay the loans already extended to it.
When Parliament approved the new debt ceiling, only two MPs differed with the proposal arguing that the country had already taken up so much and it was time to focus on repayment, not extending the debt ceiling.
The two are Patrick Musimba (Kibwezi East) and Mohamud Mohamed (Wajir South).
Among the countries that Kenya owes a huge chunk of money is China whose Exim Bank has extended several loans to fund the SGR project.
Earlier, it had emerged that if Kenya was unable to service its loans by the time of their maturity, then the Mombasa Port, which was allegedly listed as collateral during the acquisition of the loans may be auctioned off.
The then Auditor General Edward Ouko, however, dismissed the claims stating that the port was not a security between Kenya and it’s lender.
Ouko’s sentiments were echoed by Chinese Foreign Ministry Spokesperson Hua Chunying who said that relevant loan documents were scrutinised but such claims could not be ascertained.
“We have checked with the relevant Chinese financial institution and found that the allegation that Kenyan side used the Mombasa Port as a collateral in its payment agreement with the Chinese financial institution for the Mombasa-Nairobi railway is not true,” Chunying said in a statement.
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