Ksh.2.6 billion daily loans in Yatani’s budget

Kenya is projected to borrow an equivalent Ksh.2.6 billion on a daily basis in the new financial year commencing on July 1.

Net financing across the 2021/2022 financial year has been estimated at Ksh.953 billion from Ksh.930 billion last year as the exchequer steps up its reliance on borrowing to finance government spending.

The rate of borrowing is much higher in gross terms after adding Ksh.608.9 billion in scheduled debt redemption which pushes loans to an equivalent of Ksh.4.3 billion daily.

Out of Ksh.3.6 trillion representing the 2021/2022 budget, the government expect to merely raise Ksh.2 trillion in total revenues to leave nearly Ksh.2 trillion unmatched spending.

Discrepancies between revenues raised and spending plans continue to primarily drive not just fiscal deficits but also the stock of public debt in the country.

“On one hand, we continue to see spending plans hit the ceiling while on the other, revenues are not keeping up with expenditure plans,” said Genghis Capital Head of Research Churchill Ogutu.

Debt pain

By June 2022 when the budget is fully implemented, the stock of public debt is expected to have shot up by Ksh.900 billion to Ksh.8.6 trillion from Ksh.7.7 trillion at the end of this month.

The greater debt stock will only be Ksh.400 billion shy of the prescribed Ksh.9 trillion debt ceiling by Parliament.

At the same time, the government will be spending about 66 shillings out of every Ksh.100 shillings collected in revenues to service debt during the fiscal year.

The high cost of debt service is expected to trim government revenues available for other services including new projects.

PKF Partner Michael Mburugu argues the country is technically in a debt fix even as the National Treasury through its Cabinet Secretary Ukur Yatani continue to play down Kenya’s debt exposure.

“The government may not admit it but its clear we have over-leveraged borrowing. Even if the denials persist, Kenyans will soon witness struggles by government in meeting debt costs,” he said.

“When debt costs are high, this means the government will spend the bulk of resources paying off the arrears at the expense of services provision.”

Heavy capital investments have largely been attributed for fueling the growth in debt.

Nevertheless, Mburugu argues slow and dismal returns on investments have dealt a heavier blow in plans to contain the meteoric rise in borrowing.

The government has for instance been forced to borrow to repay old debt taken to finance the very same capital projects.

Kenya’s stock of debt is expected to hit Ksh.10.6 trillion by June 2025 even as net financing cools-off to an estimated Ksh.613.8 billion in the same fiscal year.


Public debt 2021/22 budget

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