{"id":18208,"date":"2020-11-27T20:33:01","date_gmt":"2020-11-27T20:33:01","guid":{"rendered":"https:\/\/www.africa-press.com\/kenya\/?p=18208"},"modified":"2020-11-27T20:33:01","modified_gmt":"2020-11-27T20:33:01","slug":"kenya-races-closer-to-the-red-line-as-debt-hits-sh8-4-trillion","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/kenya\/economy\/kenya-races-closer-to-the-red-line-as-debt-hits-sh8-4-trillion","title":{"rendered":"Kenya races closer to the red line as debt hits Sh8.4 trillion"},"content":{"rendered":"

Author:\u00a0DOMINIC OMONDI\u00a0<\/strong>
\nAfricaPress-Kenya:<\/strong> Kenya\u2019s public debt has touched a high of Sh8.4 trillion and is quickly racing towards the Sh9 trillion ceiling as the government chalks up more borrowing in its fight against Covid-19.<\/p>\n

This is slightly over three-quarters of the country\u2019s total economic output, technically known as gross domestic products (GDP).<\/p>\n

Such a ratio tells a sad story of how Kenya is teetering on the precipice of a financial collapse and it might soon experience difficulties in servicing its loans.<\/p>\n

In a report titled Post Covid-19 Economic Recovery Strategy 2020-22, the National Treasury noted that as at August 2020, the stock of public debt stood at Sh7.06 trillion, 69.2 per cent of GDP.<\/p>\n

\u201cThis together with committed undisbursed debt of Sh1.35 trillion translates to a stock of public debt of Sh8.41 trillion against a ceiling of Sh9 trillion, which implies limited space for additional borrowing,\u201d Treasury said in the paper that was released this month.<\/p>\n

Assuming a projected GDP of Sh11 trillion, the additional loans push the debt-to-GDP ratio to 76 per cent, which is close to, or over, the 70 per cent threshold for low middle-income countries such as Kenya when adjusted for prevailing mitigating terms such as interest.<\/p>\n

Should creditors demand to be paid all their debts, this would see the output for 43 counties wiped out, leaving Kenya\u2019s economy shrinking into the size of Nairobi, Nakuru, Kiambu and Kisumu combined.<\/p>\n

\u201cThe accumulation of public and public-guaranteed debt and the challenges of servicing it is now recognised as a major constraint to rapid growth in the country,\u201d explained the Treasury.<\/p>\n

In the current financial year ending June 2021, Treasury will pay Sh904.7 billion to both domestic and external creditors, almost half of the government revenue, leaving it with little to spend on vital services such as healthcare at a time when the country is battling a pandemic.<\/p>\n

The Treasury, seemingly jolted by the imminent financial crisis, will be requesting for debt moratorium or cancellations going forward, joining tens of thousands of its citizens who have sought to have their loans rescheduled due to the pandemic.<\/p>\n

The debt restructuring is aimed at giving the country some breathing space in its debt repayment schedule as it grapples with low tax revenues due to a volatile business environment that has seen the Kenya Revenue Authority miss its targets.<\/p>\n

\u201cThis will ease fiscal pressure from expensive external commercial debt servicing and decrease issuance of shorter-dated domestic government paper to reduce refinancing risk and the public debt burden,\u201d Treasury said in the report.<\/p>\n

Luckily, most of the loans have been cheap credit from the International Monetary Fund (IMF), the World Bank and other multilateral institutions.<\/p>\n

Treasury has thus been able to replace the share of expensive external loans such as Eurobonds and syndicated loans from its portfolio.<\/p>\n

With these loans, which have longer repayment periods, Kenya has time to grow the economy \u2014 and in the process earn more revenues \u2014 way before the debts are due.<\/p>\n

Expensive commercial debt has increasingly been taking up a huge chunk of the country\u2019s stock of borrowing, a situation that has seen the country breach a number of debt sustainability metrics.<\/p>\n

For example, if all export earnings were to be used to repay foreign creditors, for every Sh100 that the country earned in 2013, only Sh4 would have been used to service external debt.<\/p>\n

By end of last year, this had gone up more than seven-fold to Sh29, far above the recommended threshold of Sh21.<\/p>\n

Export earnings are a good indicator of a country\u2019s capability to repay its external loans which are normally denominated in foreign currencies, mostly US dollars in the case of Kenya.<\/p>\n

A debt sustainability analysis done jointly by the World Bank and IMF in May put Kenya\u2019s risk-to-debt distress (default) at \u201chigh\u201d, just a rung higher than countries such as Zambia which have already defaulted.<\/p>\n

However, the World Bank emphasised that Kenya\u2019s debt position was sustainable, with the country yet to face repayment difficulties.<\/p>\n

Although excessive borrowing has been occasioned by the pandemic that has disrupted economic activities, the World Bank and IMF asked the government to return to its belt-tightening plans as soon as possible to avert a financial crisis.<\/p>\n","protected":false},"excerpt":{"rendered":"

Author:\u00a0DOMINIC OMONDI\u00a0 AfricaPress-Kenya: Kenya\u2019s public debt has touched a high of Sh8.4 trillion and is quickly racing towards the Sh9 trillion ceiling as the government chalks up more borrowing in its fight against Covid-19. This is slightly over three-quarters of the country\u2019s total economic output, technically known as gross domestic products (GDP). Such a ratio […]<\/p>\n","protected":false},"author":84,"featured_media":18209,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5,8],"tags":[411,689,5492],"class_list":["post-18208","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","category-homepage-english","tag-kenya-revenue-authority","tag-treasury","tag-treasury-cs-ukur-yatani"],"yoast_head":"\nKenya races closer to the red line as debt hits Sh8.4 trillion - kenya<\/title>\n<meta name=\"description\" content=\"Kenya\u2019s public debt has touched a high of Sh8.4 trillion and is quickly racing towards the Sh9 trillion ceiling as the government chalks up\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/kenya\/economy\/kenya-races-closer-to-the-red-line-as-debt-hits-sh8-4-trillion\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Kenya races closer to the red line as debt hits Sh8.4 trillion\" \/>\n<meta property=\"og:description\" content=\"Kenya\u2019s public debt has touched a high of Sh8.4 trillion and is quickly racing towards the Sh9 trillion ceiling as the government chalks up\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/kenya\/economy\/kenya-races-closer-to-the-red-line-as-debt-hits-sh8-4-trillion\" \/>\n<meta property=\"og:site_name\" content=\"kenya\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2020-11-27T20:33:01+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/kenya\/sites\/28\/2020\/11\/tctawbof3d1dgb5fbfea1b7fce6.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"577\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/kenya\/economy\/kenya-races-closer-to-the-red-line-as-debt-hits-sh8-4-trillion#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/kenya\/economy\/kenya-races-closer-to-the-red-line-as-debt-hits-sh8-4-trillion\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/kenya\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"Kenya races closer to the red line as debt hits Sh8.4 trillion\",\"datePublished\":\"2020-11-27T20:33:01+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/kenya\/economy\/kenya-races-closer-to-the-red-line-as-debt-hits-sh8-4-trillion\"},\"wordCount\":711,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/kenya\/economy\/kenya-races-closer-to-the-red-line-as-debt-hits-sh8-4-trillion#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/kenya\/sites\/28\/2020\/11\/tctawbof3d1dgb5fbfea1b7fce6.jpg\",\"keywords\":[\"Kenya Revenue Authority\",\"Treasury\",\"Treasury CS Ukur Yatani\"],\"articleSection\":[\"all news\",\"economy\",\"homepage-english\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/kenya\/economy\/kenya-races-closer-to-the-red-line-as-debt-hits-sh8-4-trillion#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/kenya\/economy\/kenya-races-closer-to-the-red-line-as-debt-hits-sh8-4-trillion\",\"url\":\"https:\/\/www.africa-press.net\/kenya\/economy\/kenya-races-closer-to-the-red-line-as-debt-hits-sh8-4-trillion\",\"name\":\"Kenya races closer to the red line as debt hits Sh8.4 trillion - 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