Kenya’s rising total public debt is expected to reach $31.6 billion (Sh3.2 trillion) at the start of 2016/17 financial year.
According to the budget summary for 2016/17, the National Treasury has proposed to spend $4.66 billion (Sh470.81 billion) to service public debt.
Cabinet secretary Henry Rotich says Kenya’s borrowing still falls within the guidelines set in the management of public debt. The debt sustainability analysis indicates that Kenya’s debt ratio remains within sustainable levels, adding that the safety margins to the indicative thresholds are lower than what had previously been recorded.
The World Bank’s Country Policy and Institutional Assessment (CPIA) assessment have awarded Kenya a score of 3.8 and thus is subject to the threshold ratio of 74 per cent on the Present Value of Debt to Gross Dometsic Product (GDP).
Michael Wambugu PKF Partner says Kenya’s public debt-to-GDP ratio is 41 per cent — which is by any standard still manageable. He says the current value (PV) of public debt-to-GDP is expected to be 43.7 per cent during financial year 2015/16 before declining to 41.3 per cent by the year 2017/18.
“The debt service-to-revenue ratio remains below the 30 per cent threshold. Over the medium term, the results from the DSA indicate that Kenya’s public debt remain sustainable,” he says.
However, while borrowing is viewed as a noble task for countries developing their infrastructure, analysts admit there is need to strike a balance between domestic and external borrowing. They urgue over borrowing could plunge the country into a severe debt crisis in the absence of alternative measures.
Cytonn Investments Manager Maurice Oduor says there are risks associated with the changing funding patterns that could see the country’s debt levels rise, if government’s unrelenting borrowing spree is not controlled.
Oduor says external borrowing is good but only if it is done at the concessional rate.
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