Kenya’s rising debt overshadows positive economic outlook


Kenya's rising debt overshadows positive economic outlook
Control Risks Group

In Summary

  • A global risk consultancy is projecting a promising year for Kenya this year even though this may be overshadowed by the country's rising debt.
  • Kenya's debt at the moment is sustainable although pressure is expected to mount on government's fiscal management as the country's appetite for external borrowing continues to grow.
  • The government is expected to borrow more as the current administration moves to meet its Big Four agenda plan obligations.

A global risk consultancy is projecting a promising year for Kenya this year even though this may be overshadowed by the country’s rising debt.

Control Risks, a London-based risk and strategic consulting firm specialising in political, security and integrity risk says the country’s economic outlook for 2018 is promising following a turbulent political season that characterised 2017.

The consultancy, however identifies Kenya’s current debt as a potential deadlock to potential investments in the economy. Kenya is currently on a lending tightrope that experts say is affecting the ratio of debt to Gross Domestic Product (GDP).

Speaking at the launch of the 2018 Risk Map, Control Risks Associate Director Patrick Matu said that there is need for government to formulate fiscal management policies although the current debt in the country is sustainable.

“The reality is that debt at the moment is sustainable based on what we see going on in the economy but there isn’t room to do much more,” said Mr. Matu. “One of the concerns is that we are borrowing to pay debts. That is not sustainable in the long term and it will be interesting to see how government deals with fiscal management.”

Kenya is currently faced by an impending payment of the first part of a Eurobond amounting to Ksh.7.9 billion ($774.8 million) in 2018. The government has just completed a road show in the United States to encourage investments into a second issuance of the Eurobond meant at servicing infrastructure debts.

Kenya’s appetite for external borrowing is likely to increase over the next five years as the Jubilee administration rolls out its Big Four agenda for the country.

The project is expected to choke funds away from productive sectors of the economy as the government moves to meet its infrastructural obligations.

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Story By Kepha Muiruri
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