‘Public debt is within sustainable levels,’ CS Rotich insists


President Uhuru Kenyatta with World Bank Vice President for African Hafez Ghanem
FILE PHOTO | President Uhuru Kenyatta with World Bank Vice President for African Hafez Ghanem in Addis Ababa, Ethiopia

In Summary

  • On May 29 this year, the World Bank approved a Ksh.75 billion loan to Kenya for budgetary support.
  • For the first time in many years, the World Bank put cash straight into the National Treasury to be used at the discretion of the government.
  • The loan approval came even after CBK Governor Patrick Njoroge warned that the country has reached its debt limit.

The government has maintained that its debt is sustainable and projected to decline.

According to Treasury CS Henry Rotich, loans granted to the government have been used to finance development projects such as ports, railway, roads, energy and water.

Also Read: World Bank grants Kenya another Ksh.75 billion loan 

Responding to critics who claim that the money is largely looted and diverted from its intended use, Rotich said the funds must be used “wisely”.

The government has also been accused of over borrowing and burdening the public with debt making it nearly impossible to repay the loans.

“Mr. Speaker, resource mobilization through borrowing will be in accordance with the Public Finance Management Act, 2012 and guided by the annual Medium Term Debt Management Strategy, which this House approves annually, and which seeks to minimize costs and risks on public debt and borrowing,” he said.

CS Rotich said the government is committed to reducing fiscal debt “to create more fiscal space and to reduce the public debt.”

In the coming financial year, Treasury expects revenues, including A-i-A (Appropriation in Aid – Income that a Government department is authorised to retain) of Ksh 2.1 trillion (19.7 percent of GDP).

Expenditures and net lending are projected at Ksh.2.8 trillion (25.7 percent of GDP), leaving a fiscal deficit including grants of Ksh.607.8 billion, he said.

In relation to GDP, the CS said the deficit translates to 5.6 percent, a decline from 6.8 percent in FY 2018/19 and 7.4 percent for FY 2017/18.

“Mr. Speaker, the fiscal deficit of 5.6 percent of GDP in FY 2019/20 will be financed by net external financing of Ksh.324.3 billion (3.0 per cent of GDP) and net domestic financing of Ksh.283.5 billion (2.6 per cent of GDP),” he added.

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Story By Benjamin Muriuki
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