The International Monetary Fund (IMF) has raised Kenya’s debt risk to high from moderate as a result of the ongoing impact of the deadly Covid-19.
Kenya’s debt at the end of 2019 stood at 61.7 percent of the country’s gross domestic product (GDP) from 50.2 percent in 2015 driven by large budget deficits.
Kenya’s economy has literally been surviving on the wheels of debts as the government continues to borrow both within and without to sustain its huge spending that is often way above the revenues collected.
Despite raising concerns over the rising debt, the IMF maintains that the debt load for Kenya is “still within manageable levels.” Last week, the IMF approved 78.4 billion shillings as loans for Kenya.
The risk of debt distress has moved to high from moderate due to the impact of the global Covid-19 crisis which exacerbated existing vulnerabilities, said IMF in a statement.
To sustain itself going forward, the Kenyan government will have to tax its populous more if it wants to cut down on debts, something unlikely to happen given that more Kenyans are now out of jobs.
Businesses shut down
As a measure to stop further spread of Covid-19, the government, through the Ministry of Health, ordered the closure of all bars, clubs, reduced hotels to take-aways, and made changes in the transport sector.
The announcement and extension of dusk to dawn curfew, as well as the cessation of movement in and out of some counties including Nairobi and Mombasa have greatly affected businesses in the country.
Hundreds of thousands of Kenyans have already lost their jobs as companies and businesses moved to cut down on costs by laying off employees.
Corruption
Even as Kenya moves to sustain her debt “within manageable levels”, corruption is still the largest hindrance to the realization of various projects. The country still loses more than a third of her budget annually to corruption.