Controller of Budget Margaret Nyakang'o has sounded the alarm regarding Kenya's escalating debt portfolio, shedding light on its surpassing of the required limit.
In her National Government Budget Implementation Review Report, covering the initial six months of the ongoing financial year, Nyakang'o highlighted that Kenya's debt has exceeded the prescribed limit of 55 per cent of the GDP, as stipulated in the Public Finance Management Act.
The report indicates that as of December 31, 2023, Kenya's outstanding debt amounted to a staggering Ksh11.14 trillion. This sum encompassed Ksh6.09 trillion owed to external lenders and Ksh5.5 trillion attributed to the domestic debt portfolio.
Nyakang'o emphasized the necessity for the Executive to implement various fiscal measures to mitigate the burgeoning debt, especially in the face of fluctuating exchange rates exacerbating Kenya's financial obligations.
Given that a significant portion of the loans is denominated in dollars, the debt burden escalates whenever the Kenyan Shilling weakens against the Dollar.
"Section 50(2) of the PFMA 2012 states that the national government may borrow money under this Act or any other legislation and shall not exceed the limit set by Parliament. The public debt ceiling was set at 55 per cent of the Gross Domestic Debt by Parliament (Ksh10 trillion as of the end of December 2023).
"Significantly, the public debt stock surpassed the parliamentary limits. The Controller of Budget recommends that there is a need to reduce deficit budget financing through fiscal consolidation to curb further growth of public debt. Further growth in public debt strains revenue since public debt is a first charge to the Consolidated Fund," the report delineated.
Meanwhile, President William Ruto has actively pursued loans from multilateral institutions like the World Bank and the International Monetary Fund (IMF) in recent months.
For instance, in January, IMF approved a Ksh99.9 billion (USD684.7 million) credit facility for Kenya, with the funds deemed crucial given the impending maturity of the USD2 Billion Eurobond due in June.
Remarkably, the government settled the maturing Eurobond earlier in the week through successful pricing in the Eurobond market during the month.
"Yesterday marked a significant financial milestone for Kenya as we successfully settled the buyback of a substantial part of the USD 2 billion 2014 Eurobonds that were scheduled to mature on June 24, 2024, by paying USD1.5 billion raised on February 12, 2024.
"The successful execution of both the buyback and the new bond issue demonstrates strong investor confidence in Kenya through the international capital markets, and a vote of confidence in the government's overall economic management, particularly our public debt management strategy," Ruto articulated during the government retreat on February 21.