- The country's total debt is currently at Sh7.71 trillion
- The rising debt stock has resulted in a high debt servicing expenditure amounting to Sh1.17 trillion
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Kenya's debt will be only Sh300 billion shy of Sh9.1 trillion limit by end of the ongoing financial year.
The report by the Senate Committee on Finance on the status of Kenya's debt presented on the floor of the house shows the country's debt will be Sh8.7 trillion by end of June next year.
''This will brings it to Sh337 billion short of Sh9 trillion debt ceiling and will result in the shortage of borrowing space to finance medium-term expenditure,'' the Senate Committee on Finance says in the report.
The committee attributes the rising debt to a persistent fiscal deficit, primarily driven by public expenditure related to an aggressive infrastructure development plan.
According to the report, the country's total debt is currently at Sh7.71 trillion and an additional undisbursed loan facility worth Sh1.31 trillion, bringing the total amount to Sh9.02 trillion.
The executive has been pushing the National Assembly to revise upwards the country's debt limit to Sh12 trillion to allow more borrowing space, an aspect that has been opposed by international lenders like the World Bank.
The rising debt stock has resulted in a high debt servicing expenditure amounting to Sh1.17 trillion in this financial year up from the projected Sh952.7 billion.
High debt service reduces the equitable share available to both levels of the government which affects service provision due to delays in disbursements.
The exchequer has on many occasions delayed releasing funds to county governments, leading to industrial actions.
Senators have accused the National Treasury of contravening Section (15) (2)(c) of the Public Finance Management Act, 2012 which stipulates that borrowed funds shall only be used to finance development expenditure.
According to the report, the exchequer spent more than 80 per cent of the Sovereign Bond to finance recurrent budget in the last financial year.
It shows that Sh61.5 billion out of Sh70.17 billion of Sovereign Bond proceeds was used to pay government employees in 2020/2021.
The Charles Kiburu led Committee regretted that the government is spending more than 60per cent of its tax revenue to repay debt, a move it terms as highly unsustainable.
It further revealed that the government has been paying commitment fees on loans it has not utilised since 2017.
Kenya's debt has been under sharp focus in recent times, with international rating firms like Moody's S&P and recently Agusto & Co.
The Pan- African credit rating firm termed Kenya's debt situation as 'moderately high risk', affirming creditworthiness at B+.
In May, Moody's changed the outlook on the Government of Kenya's ratings to negative from stable affirming the country’s B2 issuer and senior unsecured ratings.
It attributed the negative score to the country’s rising financing risks posed by large gross borrowing requirements, which include amortization of external bilateral debt and the need to refinance a large stock of short-term domestic debt.
In July, Standard and Poor's (S&P) lowered the country’s sovereign credit outlook to ‘negative’ from ‘stable’, citing unstable economic growth due to coronavirus pandemic.
In May, IMF also raised Kenya’s risk of debt distress to high from moderate in a statement because of the costly impact of the worsening Covid-19 crisis.