DEBT HEADACHE

…Kenya’s debt repayment headache growing daily

NAIROBI- Budget experts now warn that Kenya risks surpassing its Sh9 trillion budget ceiling in the coming years as it continues to borrow heavily to finance the ever-ballooning budget deficits.

With at least Sh1 trillion, the gaping hole in the Sh2.79 trillion budget for the 2020/21 financial year, it means that the country will have to borrow heavily from local and foreign markets to finance it.

The International Budget Partnership (IBP) in its state of Kenya’s public debt paper; the thin line between a rock and a hard place, notes that the government has to find ways to reduce the country’s debt repayment burden by restructuring some of its loans. “The country has to reduce commercial borrowing that has been more expensive and with shorter maturity periods,” John Kinuthia and Abraham Rugo, joint managing partners at the IBP, warn in their October 2020 paper.

This comes as Kenya’s debt repayment bill grows rapidly with the increasing proportion of ordinary revenue absorbed by debt becoming a serious threat to the country’s critical service provision areas.

According to

Budget Policy the 2020 Statement (BPS), the National Treasury has indicated that all additional resources in 2020/21 will be taken up by debt servicing and pensions.

In the current financial year, the country is required to repay Sh904 billion in interest accrued from the public debt, which stands at Sh6.7 trillion as at the end of June 2020.

The public debt figure is equivalent to about 66 percent of the Gross Domestic Product (GDP).

With the expected dip in revenue collection caused by the global Covid-19 pandemic, the country is staring at difficult times ahead.

– DAILY NATION, Kenya.