Economy strained as Kenya spends billions more to service debts
Kenya is spending close to Sh22 billion more to service loans compared to last year, as the public debt burden continues to weigh down the economy.
The latest report from the Controller of Budget (COB) shows that debt servicing costs increased by at least 47 per cent in the first three months of 2021/22 compared to the year to June 2021.
While the government spent Sh138.75 billion to settle public debt in the first quarter of 2020/21, between July and September 2021, the figure rose to Sh204.19 billion, COB reveals.
This happened as the public debt stock rose to Sh8 trillion by the close of September, with the government receiving more debt until last month.
Of the Sh204 billion the government spent repaying loans between July and September 2021, the national government budget implementation review report states, 47 per cent of it - Sh96 billion – was used to pay interest.
“Total expenditure on public debt during the reporting period amounted to Sh204.19 billion, representing 17.4 per cent of the gross estimates, compared to Sh138.75 billion (15.3 per cent) recorded in a similar period, FY 2020/21,” COB Margaret Nyakang’o reported.
Sh21.8 billion
This means that Kenya is now spending Sh21.8 billion more per month to settle debts or over Sh700 million more daily.
By September 30, Kenya’s external debt was Sh4.058 trillion, with domestic debt totalling Sh3.939 trillion, adding up to Sh7.997 trillion or just Sh2 billion shy of the Sh8 trillion mark.
“As of September 30, 2021, the public debt stock stood at Sh8.0 trillion, comprising 51 per cent due to external lenders and 49 per cent to domestic lenders. Public debt recorded a 3.6 per cent growth from Sh7.12 trillion reported as of September 30, 2020,” the report states.
The debt by September 2021 also represented a 55 per cent growth in the burden, compared to the Sh5.15 trillion Kenya owed domestic and external lenders just three years ago.
The government in the current financial year allocated Sh1.17 trillion to servicing public debt, Sh211.6 billion more compared to last year. Of the amount to be spent paying debts this year, Sh560 billion (48 per cent) will go to interest payments.
External debt
“This expenditure comprised Sh107.25 billion towards principal redemptions and Sh96.05 billion towards interest payments,” the COB July-September 2021 report showed.
“External debt servicing amounted to Sh78.17 billion (Sh47.27 billion for principal payments and Sh30.02 billion for interest payments). The total domestic debt payment was Sh126.02 billion (Sh59.98 billion and Sh66.03 billion for principal and interest payments, respectively).”
The Treasury had in August reported that the public debt hit Sh7.919 trillion, representing 63.9 per cent of the rebased gross domestic product (GDP) and indicating that the external debt stock increased by Sh34 billion between July and August.
“Debt owed to bilateral creditors increased by Sh11.4 billion from Sh1.059 trillion while multilateral debt increased by Sh18.7 billion from Sh1.678 trillion. Commercial debt increased by Sh2.3 billion from Sh1.1 trillion during the same period,” the Treasury stated. BY DAILY NATION
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