Kenya Is Using Ksh.2.6 Billion Daily To Pay Debt, The Same Amount It Borrows
Kenya is now using Ksh.2.6 billion daily to pay off its outstanding debt according to a new analysis of government spending.
This substantive figure is coincidentally the same amount the country borrows on average in a single day.
Technically, this means that Kenya is deploying an equivalent of all of its borrowing proceeds to refinance principal debt and pay up outstanding interest on loans.
The analysis covers a 273-day period presented by the 2020/21 financial year from July 1, 2020, to March 31, 2021, and uses data from the National Treasury statement of actual revenues and net exchequer issues as of March 31.
Total public debt redemption costs between July last year and March are tabulated at Ksh.699.5 billion.
In the same period, new borrowing from both the domestic and external markets tallies to Ksh.713.8 billion rounding off to an average of Ksh.2.6 billion in a day.
The analysis mirrors Kenya’s growing risk of debt distress as recently cited by the International Monetary Fund (IMF) in its country report a fortnight ago.
Kenya has been forced to accelerate new borrowing to cover a glut in spending with the country pulling all strings to reach new funds to steady ship.
Recently, the country signed off on a Ksh.255 billion ($2.34 billion) new loan program from the IMF which is geared at covering emergent fiscal risks and shocks to balance of payment requirements over the medium term.
The Kenyan public has nevertheless been unimpressed by the country’s appetite for new borrowing as mirrored by their vehement opposition for the IMF facility in the aftermath of the deal’s appointment.
The country has spiked up against its rate of borrowing in recent months with new debt contracted in 2020 for instance standing at Ksh.1.2 trillion in 2020 or an equivalent Ksh.3.3 billion in daily loans.
More inflows from debt are however expected to accelerate in upcoming months including a potential Ksh.80.3 billion ($750 million) loan from the World Bank and nearly Ksh.800 billion ($7.5 billion) in new Eurobond issues.
Kenya’s sizable debt continues to pile pressure on the distribution of revenues amidst their contraction following the emergence of COVID-19 last year.
For instance, for every Ksh.100 in taxes collected between July and March, Ksh.68.40, more than three-quarters of all taxes went towards the repayment of debt.
Cumulative tax revenues in the period stood at Ksh.1.037 trillion while public debt redemption costs rounded off to Ksh.699.5 billion.
In six months to December, about 61 percent or Ksh.61.40 out of every Ksh.100 in tax collected was used to offset the debt.
Greater spending on debt redemption has truncated spending deployed in other government services including expenditures allocated to development projects.
Net disbursements to recurrent and development spending as a percentage of targets to June for instance stood at a lower 66.3 and 45.9 percent respectively.
Kenya’s debt stock at the end of January this year stood at Ksh.7.4 trillion.
This comprises Ksh.3.8 billion in outstanding external loans and Ksh.3.5 billion in locally contracted debt.
The stock of debt has risen by about four times from Ksh.1.8 trillion from March 2013 when the current Jubilee administration took office.