(3 Minutes Read)
The government of Kenya spent more than half a trillion shillings to service debts in the first two months of this year, even as it remains with a larger burden of repaying more than Sh700 billion in the four months to June. The latest data from the National Treasury shows that in January and February, government spending on public debt was Sh560 billion.
The Treasury, in the update on government revenues and exchequer issues for eight months starting July 2023 to the end of February 2024, notes that total issues towards public debt service hit Sh1.157 trillion by the end of February. This was a sharp jump from the Sh597 billion that the Controller of Budget (COB) reported as expenditure on public debt service, between July and the end of December 2023.
Part of the heavy spending on public debt service is the Sh210 billion (USD 1.44 billion) the government used for partial early redemption of the USD 2 billion (Sh266.5 billion, at current exchange rates) Eurobond that was due in June, as the Treasury sought to rebuild investors’ confidence that Kenya would not default on the debt. The Treasury in February went to the Eurobond market and borrowed $1.5 billion that will be due in 2031, which was used to settle part of the 2014 Eurobond.
The proceeds from the 2031 Eurobonds will fund the offer to buy Kenya’s existing USD 2 billion Eurobonds due in 2024, pending demand in the tender offer,” Treasury Cabinet Secretary Njuguna Ndung’u said in February. The CS said the 2031 Eurobonds would “smoothen the maturity profile” of the Eurobonds maturing in June this year.
The remaining 2024 Eurobonds not purchased in the tender offer will be funded through government funds and financing from multilateral and bilateral sources, including bank syndication,” Prof Ndung’u said. While Sh210 billion was used towards the settlement of the Eurobond, the overall spending of Sh560 billion on public debt service for the two months shows the government spent an extra Sh350 billion on debt service during the two months.
Overall, the amount the Treasury has released towards public debt service during the eight months is more than half (51.8 percent) of all the monies it released to facilitate the operations of the national government. The amount is also 5.6 times the Sh206 billion the Treasury released to all 47 counties as their equitable share of revenues during the period.
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The spending on public debt service during the eight months is also more than the entire amount — Sh1.153 trillion — the Treasury spent on paying public debts during the last financial year (2022/23). During the current year ending June, the government is expected to spend Sh1.866 trillion on servicing debts. This is after the public debt service budget was revised in the supplementary budget from Sh1.75 trillion originally.
