State interest payout Sh38bn above target

The Treasury building in Nairobi. PHOTO | FILE  NATION MEDIA GROUP

By GEORGE NGIGI, gngigi@ke.nationmedia.com

In Summary

• Data from Treasury shows it spent Sh416.2 billion to settle public debt against a target of Sh378 billion.
• Kenya’s debt levels have been rising with the International Monetary Fund, World Bank and Central Bank of Kenya urging the government to tame its appetite for new debt.

The Treasury overshot its budgetary allocation for interest payments by Sh38.2 billion last year signalling tough times for the country as the shilling weakens.

Data from Treasury shows it spent Sh416.2 billion to settle public debt against a target of Sh378 billion.

A gazette notice signed by the Finance secretary Henry Rotich also disclosed the country borrowed more than double what it had budgeted from the reopening of the sovereign bond last December.

The Treasury raised Sh73.8 billion from the sovereign bond sale against the planned Sh36.4 billion.

As at the time of going to press the Treasury had not responded to our email queries despite promising to do so.

Kenya’s debt levels have been rising with the International Monetary Fund, World Bank and Central Bank of Kenya urging the government to tame its appetite for new debt. Fitch, a global ratings agency, has recently downgraded Kenya as a result.

READ: Fitch puts Kenya on negative outlook as public debt mounts

Central Bank officials earlier this week disclosed they were helping the Treasury improve its cash management practices that have seen it unnecessarily raise the debt burden.

“Most of the time you will find them having balances in ministries and they are paying interest on the overdraft.

“So we are trying to work on a project that can minimise the interest they pay by consolidating the amounts,” said CBK officials at a meeting with senators.

Rebasing of the economy last year gave the Treasury headroom to absorb new debt and it has not shied away from borrowing, especially from the foreign markets.

The Treasury shows the government remained within budget target for domestic borrowing though, taking up Sh292.6 billion from locals against Sh339.8 billion it had projected.

READ: Treasury says Sh2.5trn public debt manageable

Borrowing from domestic market crowds out private investors and increases interest rates charged on business and household loans.

Last year, Parliament nearly doubled Treasury’s borrowing limit from external markets to Sh2.5 trillion from Sh1.3 trillion arguing the move would allow for funding of infrastructure projects without hurting growth. In 2013, Parliament had raised the ceiling to Sh1.2 trillion from Sh800 billion.