Skip to main content
September 20, 2018

Kenya warned debt could lead to discrimination

Standard Chartered Africa and Middle east chief economist Razia Khan at the release of the global and regional economic outlook in Nairobi yesterday/ENOS TECHE
Standard Chartered Africa and Middle east chief economist Razia Khan at the release of the global and regional economic outlook in Nairobi yesterday/ENOS TECHE

Kenya needs to prove that it can deal with the existing external debt to avoid investor discrimination in future, a Standard Chartered Bank economist has said.

Latest data by the Central Bank of Kenya indicates the government external debt is at Sh2.31 trillion as of September 2017.

Managing director and chief economist Africa Global Research Razia Khan said as external debts of most African countries get close to maturity in 2022, investors will start focusing on reform differentiation and only those countries with strong fiscal consolidation stand to benefit.

“Kenya needs a lot more fiscal consolidation which must be preceded by an attempt to fix the interest rate cap issue which is an unnecessary drag on growth that the Kenya economy does not need. Fiscal consolidation only becomes more credible and possible if this issues are addressed first,” Khan said.

The situation is also likely to determine the pricing on which investors are willing to lend Kenyans and if the reforms are put in place, then cheap external credit will be available for offer.

While Central Bank governor Patrick Njoroge predicted a Gross Domestic Product growth of 6.2 per cent in the financial year 2018/2019, Khan, who unveiled the Standard Chartered economic outlook for 2018 noted that this can only be achieved by unlocking private sector credit and putting in place long term re-assurance that policies put in place will safeguard the overall growth growth environment.

“The current banking legislation in Kenya is massively on the downward trend. Anywhere in the world, if you control interest rates you are going to get a decline in the amount of credit extension, that does not serve the interest of Kenyans private sector nor that of the economy hence discouraging growth,” she said.

According to her, public investments have been driving economic growth since the introduction of Interest rate caps while the private sector has been disadvantaged when it comes to credit access, and it can only play a significant role if the rate cap is reviewed.

On the recently announced big four projects by President Uhuru Kenyatta, the economist said that Kenya needs to get more serious about how it contains its recurrent expenditure goals if it needs to realise.

Poll of the day