About Sh33 out of every Sh100 spent by the government in the five successive budget cycles to 2023 was borrowed, official data shows, pointing to the continued dependence on debt to finance the annual budget and its implication on the public debt load and sustainability.
The National Treasury estimates total deficit financing between the 2018/19 financial year and the 2022/23 cycle at Sh4.691 trillion in a period in which actual total government expenditures were tabulated at Sh14 trillion.
This implies that the government has borrowed about one-third of its expenditure needs over the five-year period with the financing being more than enough to cover the entire budget for a single fiscal year.
“The National Treasury and Economic Planning Ministry mobilised Sh4.691 trillion to finance the budget deficits for the strategic period through the issuance of two Eurobonds in the international capital markets and medium and long-term benchmark bonds from the domestic market,” the National Treasury states in its 2023-2027 strategic plan.
Deficit financing for the previous 2018-2022 cycle was defined by a mix of commercial and concessional loans with the government turning to cheap funding sources including the World Bank and the International Monetary Fund (IMF) after onset of the Covid-19 pandemic, which had the impact of locking out Kenya from the international capital markets.
Kenya has three outstanding Eurobonds from the period including a Sh116.5 billion ($900 million) issued in May 2019 at a seven per cent interest rate, and which matures in 2027.
The paper was co-issued alongside a Sh155.4 billion ($1.2 billion) paper set to mature in 2032 and attracted an eight per cent interest rate charge.
Other outstanding Eurobonds include a Sh129.5 billion ($1 billion) paper maturing in February 2028 and a sovereign bond of the same size, issued in June 2021 at a 6.3 per cent coupon and maturing in January 2034.
Kenya has meanwhile turned to the IMF to plug its balance of payments demand and has been part of a multi-year programme with the multilateral lender since February 2021.
