Kenya’s Public Debt Now At 7.7 Trillion Shillings

Kenya’s Public Debt has been on the rise, increasing at a 10-year CAGR of 18.5 percent to 7.7 trillion shillings in June 2021, from 1.5 trillion shillings in June 2011.

The rising debt has been brought about by the government’s significant borrowing to fund infrastructural projects and bridge the fiscal deficit that has averaged 7.4 percent of GDP over the 10 years.

The borrowing is both direct by the government and also by guaranteeing state corporations. The debt mix, as of June 2021 stood at 52:48 external to domestic debt, respectively, compared to 49:51 external to domestic debt in June 2011.

Kenya’s debt stock has increased significantly due to advances from Multilateral lenders such as the International Monetary Fund (IMF) of USD 2.3 bn ( Kshs 256.0 bn) and from the World Bank of USD 750.0 mn (Kshs 82.0 bn), which were used to boost the country’s COVID-19 recovery efforts.

The rise in public debt to new highs has been driven by several factors which include but are not limited to;

1. The fiscal deficit has averaged 7.4 percent in the last 10 years and is projected to be at 7.5 percent of GDP in FY’2021/22 leading to a continuous growth in borrowing and the average borrowing over the 10 years has been Kshs 622.5 bn per annum.  

2. The lower tax collections than projected in the budget. The overall tax collection rate has averaged 96.7 percent over the last 10 years leading to the government borrowing more to bridge the gap,

3. The guaranteeing of state corporations that have been underperforming leading to the burdening of the government to support them, and,

4. Increased debt servicing costs especially the commercial loans and Eurobonds since they are denominated in US dollars and with the weakening currency the cost rises.