President Uhuru Kenyatta has dismissed International Monetary
Fund (IMF) concerns over the continued pile-up of public debt and risk
of default.
Mr Kenyatta said Kenya's high ratio of debt against the gross domestic product (GDP) does not worry him.
The
IMF last week raised its assessment of Kenya’s external debt distress
from low to moderate, saying the country has breached, for an extended
period of time, the external debt indicators debt service-to-revenue
ratio.
"What would worry me is if the debt that we have incurred has
gone into recurrent expenditure, has gone into paying salaries or
electricity bills and so on and so forth. But what we have utilised our
loan for is to close the infrastructure gap," he said.
The President made the remarks in an interview with CNN's Richard Quest that was recorded last Friday and aired on Monday night.
57pc debt-GDP ratio
Kenya’s public debt to GDP ratio stood at 57 per cent in June.
The
Jubilee administration has ramped up spending since 2013 to build
much-needed new roads, a modern railway, bridges and electricity plants,
driving up borrowing to plug the budget deficit.
The increased debt has seen Kenya commit more than half of taxes
to paying loans, leaving little cash for building roads, affordable
housing and revamping of the ailing health sector.
Public
debt stood at Sh5.04 trillion in June 2018, up from Sh4.41 trillion in
June 2017, Sh3.62 trillion in June 2016, Sh2.83 trillion in June 2015,
Sh2.37 trillion in June 2014 and Sh1.89 trillion in June 2013.
The
growth in Kenya’s debt has raised concerns that the ballooning
repayment costs are hurting economic activities by taking up a large
chunk of government revenue.
Mr Jibran Qureishi, the
regional economist for Stanbic Bank, said growth in public debt has
partly been driven by over-budgeting leading to ambitious tax targets,
which have largely been missed.
The increased debt has seen Kenya commit more than half of taxes to paying loans. Taxpayers will spend Sh870.52 billion on debt repayments or half of taxes in the year to June.
The increased debt has seen Kenya commit more than half of taxes to paying loans. Taxpayers will spend Sh870.52 billion on debt repayments or half of taxes in the year to June.
Healthy 'mix'
Mr
Kenyatta says Kenya has a "healthy mix of debt" because the country's
lenders are not only China but also Japan, United States and many
others.
Mr Quest was probing the President on whether
he is aware of China's "another agenda" in the loans it is giving to
African states. "Why are we focusing only on one lender?" Mr Kenyatta
asked.
"As far as I am concerned, we have a very
healthy mix of debt from the multilateral lenders — who are basically
the World Bank and the African Development Bank — to bilateral lenders
like Japan, China, France, all who are participating and working with us
to help us achieve our objectives," added Mr Kenyatta.
On
the question of China's intentions, he replied: "We have an
infrastructure gap that we need to fill and we are going to work with
our partners across the globe who are willing to partner and to work
with us."
The president noted that Japan is the biggest
lender to Kenya's port projects while France is a major funder of
electricity generation projects.
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