KENYA'S DEBT BURDEN

Treasury promises to go slow on Kenya's borrowing

Debt levels tripled from Sh1.8 trillion in June 2013 to Sh5.89 trillion as of June this year.

In Summary

• He said Treasury is seeking to do away with a requirement restricting public debt to utmost half of GDP.

• His argument marries that of the Institute of Economic Affairs which has always criticised the debt to GDP comparison, saying it does not reflect the true nature of debt burden.

Acting National Treasury Cabinet Secretary Ukur Yattani during an interview at his Office in Nairobi on May 15, 2019.
Acting National Treasury Cabinet Secretary Ukur Yattani during an interview at his Office in Nairobi on May 15, 2019.
Image: ENOS TECHE

Kenya will not borrow up to Sh9.1 trillion limit set in the proposed amendments to the Public Finance Management law, Treasury has said.

Speaking exclusively to the Star on Tuesday, Acting National Treasury CS Ukur Yattani said although the proposed law gives the government a leeway to borrow up to Sh9.1 trillion by 2022/23, the ministry is working to limit the borrowing.

"We are not interested in burdening Kenyans with debt. Our intention is to grow our economy through sustainable borrowing. As it is today, our debt is sustainable. We are comfortably meeting our obligation," Yatani said.

 
 

He said Treasury is seeking to do away with a requirement restricting public debt to utmost half of GDP, saying debt to GDP ratio is not the best way of determining sustainability.

His argument marries that of the Institute of Economic Affairs (IEA) which has always criticised the debt to GDP comparison, saying it does not reflect the true nature of debt burden.

The institute has always fronted the debt to service ratio, saying it indicates whether the economy has the ability to repay debt.

Data released by the Institute of Economic Affairs last year shows that in 2017, 2018 and 2019, Kenya’s debt service to revenue ratio stood at 35.8 per cent, 30.5 per cent and 33.4 per cent respectively against the threshold of 30 per cent.

Yattani noted that the new debt limit would still allow Kenya to continue accessing concessional funding from bilateral and multilateral agencies to finance development programs.

Debt levels have tripled from Sh1.8 trillion in June 2013 to Sh5.89 trillion as of June this year, accounting for almost 60 per cent of GDP.

According to IMF and World Bank, the debt ceases to be unsustainable if exceeds the 74 per cent sustainability level.

 
 

The changes are contained in proposed amendments to the Public Finance Management (National Government) Regulations, 2015.

The proposed debt limit expressed in absolute figures rather than a percentage of the GDP is consistent with the principles of Public Finance in Cap 12 of the Constitution,” a notice calling for public participation in the proposal reads.


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