Kenya borrowed Sh70 billion less from the domestic and international money markets in the nine months to September compared to the same period last year.
Central Bank data shows the National Treasury borrowed Sh520 billion between January and September to mitigate the budgetary deficit, compared to Sh650 billion last year.
Kenya has been under the radar over the year with global financial institutions including the World Bank and global ratings firm Moody’s citing the country’s poor debt management and inability to follow fiscal policies.
The two institutions believe the country’s increased debt uptake could negatively impact its future ability to access financing.
“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,” World Bank stated in its Assessing Africa’s Policies and Institutions report released in September.
Central Bank governor Patrick Njoroge at the last MPC meeting held on November 27 said the country’s debt remains sustainable adding that government was leaning more towards domestic debt as opposed to external debt.
He said this would reduce dollar related risk that comes with external borrowing since interest and principal repayments are made in foreign currency.
This is evident in data by CBK which shows Treasury borrowed Sh260 billion from external lenders over nine months, a Sh150 billion or 36.59 per cent reduction from Sh410 billion borrowed during the same period last year.
On the other hand, domestic borrowing grew Sh80 billion or 33 per cent to Sh320 billion during the review period compared to Sh240 billion borrowed internally the previous year.
As at September public debt stood at Sh5.15 trillion comprising Sh2.54 trillion in domestic debt and Sh2.61 trillion external debt.
The country’s two largest creditors are the World Bank and China which currently account for about a fifth of Kenya’s total public debt.
A report by Cytonn Investments shows government borrowing is currently 15 per cent behind its projected domestic borrowing target for the current financial year. Between July and September public debt grew by Sh110 billion with domestic debt accounting for Sh60 billion compared to Sh50 billion external debt. This is against an estimated target of Sh130.7 billion.
“Kenya's large fiscal and current account deficits would expose it to tighter external financing conditions, with the possibility of rising interest rates, a risk the government is particularly sensitive to given its large borrowing requirements of about 20 per cent of GDP,” the report stated.
Kenya, with a budget of Sh3.07 trillion for the 2018/19 financial year, expects to collect Sh1.6 trillion in revenue. At least 51.56 per cent or Sh870.52 billion of which is set to go towards debt repayment against the internationally accepted threshold of less than 30 per cent.
For the current financial year, government has a budget deficit of Sh562 billion.