Economists now want the government to consider debt reorganisation to save manage Kenya's ballooning debt.
The Institute of Economic Affairs said the country’s debt service is expected to rise by 34.1 per cent to Sh870.6 billion in 2018/2019 from Sh649.4 billion the previous financial year.
Interest payment will also increase by 31 per cent from Sh305.1 billion in 2017/2018 to Sh399.9 in the current financial year, further straining the country’s purse.
IEA painted the picture at a breakfast forum in Nairobi, hosted in conjunction with the Kenya Editors' Guild.
Kenya’s debt, now stands at Sh5.04 trillion, or 56 per cent of total wealth. Of the external debt composition, China has lent 70 per cent at Sh634.4 billion.
Japan has lent Sh104.7 billion or 11.7 per cent while France is third having lent seven per cent, or Sh62.6 billion.
China’s terms of loan arrangement such as easier terms, the problem of kickbacks and no serious follow-through by the lender on whether the loan was used for its intended purpose emerged as some of the possibilities why the Asian nation has become an attractive option to borrow for African nations.
Of the external debt mix, there is an increasing shift to borrowing from commercial banks through issuing of Eurobonds, exerting more pressure on repayment as they come with higher interests and shorter repayment periods.
Noah Wamalwa, IEA's assistant programme officer said 34 per cent of the external debt mix came from banks as at June 2018. The percentage has grown from 29 per cent the year before, 25 per cent in 2016 and 20 per cent in 2015.
Programme coordinator John Mutua blamed the government for crowding out private borrowers in the domestic market by keeping the interest rate cap lawin effect, giving banks leeway to lend to government rather than private businesses.
Government securities registered a growth of 8 per cent year-on-year last year as opposed to typical loans that grew by 2.2 per cent.
Journalist Jaindi Kisero put the think-tank to task to explain the economic figures and jargon, saying the issue of debt has now gone beyond being discussed as a business issue to a crisis of national proportions.
“You could have explained to us why China is the highest lender to Kenya, with 70 per cent of the loans, and the implications of these debts to everybody,” he said.
