World Bank loans overtake China share of public debt

The World Bank is the country’s biggest lender overtaking China, which has been accused of burdening Kenyans with unsustainable debt.

Treasury records show that the World Bank has the highest share at Sh1.2 trillion, almost overtaking all commercial loans whose portfolio stood at Sh1.23 trillion as of December 2021.

Treasury’s appetite for Chinese loans has been on a steady decline since March 2021 as the World Bank’s is rising steadily.

The Status of Economy report, the latest document tabled in Parliament, shows that the International Monetary Fund had lent Kenya up to Sh211 billion.

China, which has been a centre of focus by anti-debt crusaders, is owed to the tune of Sh802 billion, coming close to Sh820 billion borrowed through sovereign bonds.

Loans from the African Development Bank totalled Sh368 billion with debt owed to Japan amounting to Sh163 billion for the period under review.

Even so, China still has the highest portion of bilateral debt – borrowed from other countries – which totalled Sh1.216 trillion as of December 2021.

It was followed by Japan (Sh163 billion), France (Sh93.8 billion), Italy (Sh40 billion) and Germany at Sh38.8 billion.

The report further shows that the Treasury borrowing has over time favoured multilateral lenders to bilateral sources and commercial lenders.

Multilateral lenders accounted for Sh1.8 trillion, followed by commercial banks at Sh1.2 trillion and bilateral lenders at Sh1.1 trillion of the Sh4.17 trillion external debt.

Local commercial banks accounted for Sh1.94 trillion of the domestic borrowings, with the Central Bank at Sh88 billion. The total public debt was Sh8.2 trillion as of the said date.

In terms of repayment, China took the lion's share of the Sh137 billion debt servicing costs incurred as of December 2021 at Sh29.9 billion.

The World Bank was paid Sh18.6 billion of the Sh25.1 billion repayments for multi-lateral loans. Italy was among the topmost paid among bilateral lenders at Sh5.4 billion.

“By end of December 2021, the total cumulative debt service payments to external creditors amounted to Sh137.3 billion comprising of Sh80 billion principal and Sh57.3 billion interest,” Treasury said.

“The debt to GDP ratio increased to 66.2 per cent in December 2021 from 64.5 per cent in December 2020. The increase is attributed to external loan disbursements, exchange rate fluctuations, and the uptake of domestic debt during the period,” the report reads.

Treasury Cabinet Secretary Ukur Yatani, during the presentation of next year’s budget estimates, said public debt reforms instituted by his administration were bearing fruits.

He said the reforms have helped strengthen debt transparency and accountability.

“Kenya’s debt carrying capacity is rated moderate and the overall public debt is sustainable. We have initiated implementation of a set of measures to lower cost and risk in the public debt portfolio,” Yatani told MPs in his April 7 budget speech.

The measures include cancellation of some non-disbursing external loans and re-arrangement of syndicated external loans.

Yatani also cited the issuance of Treasury Bonds to lengthen the maturity structure and improve debt sustainability indicators.

“The preferred debt financing are highly concessional loans offered at below-market interest rates with long repayment periods. Recourse to commercial borrowing has been maintained at minimum levels,” he said.

Yatani urged Parliament to fast-track the enactment of amendments to the Public Finance Management Act, 2012, to provide for a debt ceiling of 55 per cent of debt to GDP, in present value terms.

“Further, we’ve provided a requirement that the Cabinet Secretary National Treasury reports to Parliament whenever the debt levels swing beyond the threshold with time-bound remedial actions,” Yatani said of the Bill.

He said the alert would ensure that debt remains within sustainable levels and entrenches accountability and transparency in public debt management.

(edited by Amol Awuor)