Public debt climbs to Sh6.28 trillion on 13 new loan deals

Treasury CS Ukur Yatani: Kenya’s debt went up by 15 per cent compared to last year. FILE PHOTO | NMG 

By JOHN MUTUA
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Summary

• The Jubilee administration signed 13 loan deals in the three months to March occasioning the Sh864.4 billion rise in total public debt from Sh5.42 trillion as at March last year.
• New report shows that eight of the loans were signed with bilateral lenders while five were from multilaterals as the government increased its borrowing to fund development.
• Foreign loans account for 51.1 percent of the total debt or Sh3.21 trillion while the value of the domestic loans that attract lower interest rate stands at Sh3.07 trillion.

Kenya’s debt rose by 15 percent to Sh6.28 trillion in the three months to March, from similar period last year, documents tabled before Parliament show.

The quarterly economic and budgetary report shows that the Jubilee administration signed 13 loan deals in the period occasioning the Sh864.4 billion rise in total public debt from Sh5.42 trillion as at March last year.

The report shows that eight of the loans were signed with bilateral lenders while five were from multilaterals as the government increased its borrowing to fund development.

Foreign loans account for 51.1 percent of the total debt or Sh3.21 trillion while the value of the domestic loans that attract lower interest rate stands at Sh3.07 trillion.

Some of the projects to be funded by the loans include the bridge linking Mombasa Island to mainland Mombasa, construction of the Thwake Dam and expansion of the Nairobi water and sanitation project.

“The increase in public debt is attributed to external loan disbursements and the uptake of domestic debt during the period,” Treasury Secretary Ukur Yatani says in the report.

The Jubilee administration borrowed Sh47.7 billion from Japan International Corporation Agency (JICA) to fund construction of the gate bridge linking Mombasa Island to Mombasa mainland and Sh22.3 billion from the African Development Bank to fund construction of the Thwake dam in Makueni.

A further Sh11.6 billion was borrowed from French development agency, Agence Française de développement (AFD) to finance the Nairobi water and sanitation project.

Kenya last month borrowed Sh107 billion ($1 billion) from the World Bank and Sh78.4 billion ($739 million) from the IMF to plug budget deficit and cushion the economy from the fallout caused by the Covid-19 pandemic, further increasing the country’s debt.

The sharp rise in debt portfolio is set to exert more pressure on the country’s revenues that are already under-performing due to economic disruptions, job losses and salary cuts occasioned by the pandemic.

Official data shows that Kenya needs to pay Sh441 billion in interest on loans in the year ending this June, an amount that will rise to Sh475.9 billion in the 2020/21 period and Sh483 billion by 2021/22.

The IMF has warned that the country risks sliding into debt distress due to borrowing.

In a report, the Fund said Kenya uses nearly half of its tax collection to service interest on loans with the debt ratio rising to 57 percent of Gross Domestic Product (GDP), the highest in the East African Community except Burundi.