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September 22, 2018

Kenya ranked behind Rwanda in WB debt management study

National Treasury Cs Henry Rotich at Treasury building before heading to the Parliament for Financial year 2018/19 budget on June 14,2018.Photo/Enos Teche.
National Treasury Cs Henry Rotich at Treasury building before heading to the Parliament for Financial year 2018/19 budget on June 14,2018.Photo/Enos Teche.

Poor debt management and fiscal policies have seen Kenya trail Rwanda and Senegal in latest World Bank policy and institution assessment rankings.

In a report titled Assessing Africa's Policies and Institutions released on Wednesday, Kenya scored 3.7 points, just 0.3 points behind Rwanda which scored four points.

“In Kenya, the score was pulled down by weak capacity of the debt management office of the National Treasury and its inability to follow the Medium-Term Debt Management Strategy of 2017-2020,” the report states.

While the scores are meant to guide countries on policy formulation and monitoring, World Bank’s chief economist Punam Chuhan-Pole said better scores boost a country’s concessional financing from the lender.

The ratings were done on a scale of one to six with the average score standing at 3.2 points. Overall, slightly more than half of the regions beneficiaries of World Bank funds posted a relatively weak performance of below 3.2.

The Country Policy and Institutional Assessment score for the region was at 3.1 points which is slightly below the average performance.

Senegal was rated the second best country with 3.8 points while Kenya tied with Tanzania in position three. Uganda came in fourth with 3.6 points with Ethiopia scoring 3.4 points.

Fragile countries had difficulties to face the challenges posed by their environment regarding the high risks of conflict, commodity price shocks, or climate threat. This saw Sudan, South Sudan and Burundi scoring 2.4, 1.5 and 2.9 points respectively.

Currently, Kenya's combined domestic and foreign debt stands at Sh5.04 trillion from Sh4.41 trillion as at June 2017. Compared to June 2016, the debt has increased by Sh1.43 trillion

“Although on paper the Medium-Term Debt Management Strategy provides a framework for prudent debt management, it is not clear that it is being followed, considering the sovereign debt trajectory that has kept increasing at a sustained pace over the past years,” the report said on Kenya's low score.

Fiscal deficit widened in 2016/2017 to nine per cent due to higher expenditure and weak revenue performance. Although Kenya is targeting a deficit of 5.7 per cent in the current financial year, it currently stands at 7.2 per cent.

Consequently, Kenya's budget has been increasing despite low revenue performance. In the financial year 2017/2018, the National Treasury budget stood at Sh2.6 trillion against a revenue collection of Sh1.5 trillion.

The trend is the same in the current financial year where the budget is Sh3.1 trillion against a collection of Sh1.7 trillion by Kenya Revenue Authority.

The analysis covered 38 countries and looked at economic management, structural policies, policies for social inclusion and equity, and public sector management and institutions.

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