The government borrowed an average of Sh2.62 billion daily within four months this year as its appetite for loans to finance ambitious capital projects amid the Covid-19 pandemic continues.
The borrowing comes despite warnings from the Bretton Woods institutions — the International Monetary Fund (IMF) and the World Bank — that the continued pile up of public debt may prove a challenge to pay back.
A document from the National Treasury tabled in the National Assembly yesterday shows that Sh322,178,194,040 in 15 new loans was procured between May 1 and August 31 from various commercial and multilateral lenders.
This means that the government procured Sh887,308 an hour to finance the various projects, according to the National Treasury document.
Of the 15 new loans, 12 are from multilateral lenders and three from bilateral lenders.
The latest details come as the country’s public debt cruised to Sh7.12 trillion, about 71.2 percent of the Gross Domestic Product (GDP) against a ceiling of Sh9 trillion.
On Tuesday this week, National Treasury Cabinet Secretary Ukur Yatani told the House Committee on Finance and National Planning that the missed revenue collection target brought about by Covid-19 pandemic presents the government with no alternative but to borrow locally and externally to support the economy and other development projects.
“Our revenue is not up to date. The Covid-19 pandemic has really affected our revenues,” Mr Yatani told the committee chaired by Homabay County Woman Representative Gladys Wanga.
The Public Finance Management Act mandates the National Treasury to periodically update Parliament on the country’s debt status.
Mr Yatani told the committee that with a deficit of about Sh841 billion in the Sh3 trillion budget for the current financial year, it means that the country will borrow more to bridge the gap.
As of December last year, Kenya’s public debt stood at Sh6.2 trillion despite concerns from the two Bretton Wood institutions.
In May this year, Reuters reported that the IMF shifted Kenya’s risk of debt distress to high from moderate because of the impact of the Covid-19 disease.
Kenya, East Africa’s economic giant, had her public debt at 61.7 per cent of her GDP as at the end of 2019, an increase from 50.2 per cent as at the end of 2015.
In 2019, the World Bank warned Kenya against piling up more debt than the country can repay in the year that the Kenyan parliament increased the country’s debt ceiling to the numerical figure of Sh9 trillion from 50 percent of the GDP.
However, while appearing before the committee, Mr Yatani was bullish that the pileup of public debt will not overwhelm the country’s ability to repay.
“Our debt strategy is sustainable. We have not defaulted to repay and Kenya has never been given a debt relief on account of being unable to repay her loans,” said the CS.
Of the new loans procured, Sh82.89 billion from the International Monetary Fund (IMF) is for rapid credit facility financing.
About Sh27.12 billion from the International Bank for Reconstruction and Development (IBRD) provides financing for the affordable housing project, to enhance farmer incomes and food security and to create fiscal space to support the government's growth agenda.
The Sh81.37 billion from the International Development Association (IDA) is for support of private investment, affordable housing as well as food security.
