An­a­lysts raise red flag as pub­lic debt tops Sh3tn

This year, the gov­ern­ment plans to bor­row about Sh675 bil­lion, com­prised of Sh450 bil­lion for­eign debt and Sh225 bil­lion from do­mes­tic mar­kets

The Star (Kenya) - - News - WEITERE MWITA @MwitaMartin

Kenya’s pub­lic debt rose by 30.62 per cent to Sh3.62 tril­lion in June from Sh2.83 tril­lion, fresh data from the Cen­tral Bank shows.

This means about 55 per cent of the coun­try’s wealth is in debt com­pared to 52.8 per cent in June last year.

An­a­lysts at Re­nais­sance Cap­i­tal yes­ter­day said the gov­ern­ment needs to slow down on bud­get spend­ing to en­sure the coun­try’s debt re­mains sus­tain­able, warn­ing of a higher credit risk if the soar­ing bor­row­ing ap­petite per­sists.

The global in­vest­ment bank said the coun­try’s sov­er­eign credit rat­ing is likely to drop if the gov­ern­ment con­tin­ues to bor­row heav­ily.

It said Kenya has been loaned more than 50 per cent of the Gross Do­mes­tic Prod­uct with a bud­get deficit of above eight per cent of the GDP in the 201617 fi­nan­cial year, against an av­er­age of three per cent.

“There is a risk and at some point peo­ple will stop fi­nanc­ing bud­get deficit or de­mand high in­ter­est rates. Kenya is tak­ing more risk with the kind of bor­row­ing we are wit­ness­ing,” Re­nais­sance man­ag­ing di­rec­tor and head of macro strat­egy Charles Robert­son said.

The CBK data shows do­mes­tic debt stood at Sh1.815 tril­lion in June, while ex­ter­nal debt was Sh1.803 tril­lion.

“Kenya’s debt is some­thing to watch. The coun­try needs to slow down on spend­ing and ex­ter­nal bor­row­ing,” Re­nais­sance Sub-Sa­ha­ran Africa Econ­o­mist Yvonne Mhango said.

This fi­nan­cial year, the gov­ern­ment plans to bor­row about Sh675 bil­lion, com­prised of Sh450 bil­lion for­eign debt and Sh225 bil­lion from do­mes­tic mar­kets to bridge the gap in the bud­get.

A bud­get deficit oc­curs when the gov­ern­ment ex­pen­di­tures ex­ceed rev­enues in a given time pe­riod.

In Au­gust, global rat­ings agency Stan­dard & Poor’s said Kenya’s credit wor­thi­ness is fac­ing a pos­si­ble down­grade in the next one year.

/ENOS TECHE

Re­nais­sance Cap­i­tal Global Chief Econ­o­mist Charles Robert­son dur­ing the 2nd An­nual East Africa In­vestor Con­fer­ence in Nairobi yes­ter­day

Newspapers in English

Newspapers from Kenya

© PressReader. All rights reserved.