- Public debt is projected to be Sh9.413 trillion as at the end of June 2023
- National Treasury PS Kiptoo said public debt is expected to surpass the Sh10 trillion ceiling.
Image: EZEKIEL AMINGA
President William Ruto’s first budget has a deficit of Sh720.1 billion, documents from the National Treasury show.
According to Treasury PS Chris Kiptoo, the Kenya Kwanza hopes to finance the 2023-24 Budget deficit from foreign (Sh198.6 billion) and domestic (Sh521.5 billion) borrowing.
Ruto’s first budget has been set at Sh3.64 trillion, as the Head of State moves to fulfill his promise to create jobs for millions of the poor.
In his submissions to the Public Debt and Privatisation Committee of the National Assembly on the 2023 Medium Term Debt Management Strategy on Monday, Kiptoo said public debt is expected to surpass Sh10 trillion ceiling.
He told the committee that public debt grew from Sh8.03 trillion by end of December 2021 to Sh9.14 trillion in December 2022, Of these, he said Sh4.67 trillion is external debt while Sh4.47 trillion is domestic debt.
“Public debt is projected to be Sh9.413 trillion as of the end of June 2023 implying a borrowing space of Sh587 billion in the 2023-24 Financial Year," Kiptoo said.
"The National Treasury has initiated the process of amending the debt ceiling from the numerical number of Sh10 trillion to a debt anchor of 55 per cent of debt to GDP in present value terms."
Vice-chair of the committee Mulu Makali wanted the National Treasury to state the figure the debt ceiling should be pushed to.
“If we grant you your wish, how far would you want the ceiling pushed,” he posed.
Kiptoo revealed that the Cabinet has since approved the proposed amendment to the debt ceiling which will be submitted to Parliament for approval after public participation to enable the National Treasury fully finance the budget deficit.
“The growth in public debt is attributed to external and domestic borrowing and appreciation of the foreign currency exchange rate against the Kenyan shilling during the period under review,” Kiptoo noted.
He said external debts comprise multilateral debts (Sh2.21 trillion), bilateral debts (Sh1.21 trillion) and commercial debts (Sh1.25 trillion with Eurobond accounting for Sh0.87 trillion)
He added that domestic debts comprise Treasury bonds (Sh3.71 trillion), Treasury bills (Sh0.67 trillion) and others (Sh0.09 trillion).
Chair of the committee Shurie Abdi Omar wondered why the National Treasury has not considered adjusting the budget to fit well within the debt ceiling.
The PS told the committee the country’s public debt stock remains sustainable but with a high risk of debt distress.
“Sustainable debt is where the government is able to meet its current and future debt payment obligations when due without compromising on its other budgetary programmes and accumulating arrears,” he said.
He added low export growth has increased external debt vulnerability.
“The National Treasury requests for approval of the 2023 Medium-Term Debt Management Strategy and adoption of the optimal strategy to fund the 2023-24 fiscal deficit,” he said.
The PS said public debt sustainability is projected to improve as a result of reforms under the ongoing Extended Fund Facility/Extended Credit Facility supported by the IMF.
He added that to pursue debt sustainability, the government will optimise the use of concessional external funding sources, lengthening the maturity profile of public debt deepening the domestic debt market.