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East Africa

Kenya’s debt burden zooms by US$ 10 billion, despite efforts to rein in

August 17, 2023

(3 minutes read)

Kenya’s debt level has breached earlier records despite President William Ruto’s commitment to tame the vaulting debt burden

Kenya’s debt level has breached earlier records despite President William Ruto’s commitment to tame the vaulting debt burden. The treasury figures indicate that the total public debt rose by a record 1.56 trillion shillings (US$10.8 billion) in the financial year ended June 30 to 10.1 trillion shillings (US$70.75 billion), overshooting the debt ceiling of 10 trillion shillings.

Loan repayment costs, mainly to China, have increased as the local currency trades at record lows of around 144 shillings to the dollar. The cost of debt servicing in the year ended June was 391 billion shillings (US$2.7 billion), of which the highest payment — 107 billion shillings (US$743 million) — went to China.

The global credit ratings agencies including Fitch Ratings last month downgraded Kenya’s ability to repay international lenders from “stable to negative”. Tax hikes and social unrest were the factors that led to the downgrade. Kenyan lawmakers voted in June to change the debt ceiling from a fixed shilling amount to a proportion of the country’s gross domestic product (GDP). The Senate is yet to pass the amendment.

Ruto came to power promising to revive the economy. Economic growth slowed to 4.8 percent in 2022 from 7.6 percent the previous year. It is forecast to expand by more than five percent this year, says the International Monetary Fund (IMF). Kenya is one of the most dynamic economies in East Africa. A third of the 54 million population lives in poverty. Inflation is very high and not receding at an annual rate of 7.3 percent last month.