[SIZE=7]Kenya’s total debt now at Sh11.9 trillion with over half in foreign currency - data[/SIZE]
Feb. 18, 2019, 12:30 am
By VICTOR AMADALA @itsamadala
https://www.the-star.co.ke/sites/default/files/styles/new_full_content/public/articles/2019/02/18/1773257.jpg?itok=U1xF2_NQTreasury CS Henry Rotich with PS Kamau Thugge at National Treasury building. /FILE
Kenya has at most 17 years to clear her compound debt that stands at almost Sh12 trillion, all factors remaining constant.
The amount is way above Kenya’s Gross Domestic Product (GDP) estimated at Sh8.2 trillion, meaning the country’s net worth is in the negative.
According to 2019 Medium Term Debt Management Strategy (MTDS) tabled in parliament on Thursday last week, the principal public debt currently stands at Sh5.27 trillion with an average maturity of 16.9 years, a year lower than an average maturity of 17.5 years in 2017.
The report further indicated that Kenya’s weight average interest rate is 7.7 per cent with average interest for external debt at 4.4 per cent while that of domestic loans is at 11.6 per cent.
This, therefore, means that if Kenya was to retire its total debt today, it will have to incur an annual interest of Sh400 billion, this without factoring in foreign currency volatility.
Treasury report indicates that 50.9 per cent of Kenya’s total debt is in foreign currency. With the debt maturity standing at an average of 16.9 years, it means the country will have to pay a total of Sh6.76 trillion in interest in addition to the principle debt of Sh5.2 trillion, bringing its compound debt to Sh11.9 trillion.
World Development Indicator (WDI) estimates Kenya’s population at between 49.7 million and 51.7 million, averaging slightly above 50 million.
This means that each Kenyan owes lenders an average Sh240,000 to be settled on or before November 2035.
The MTDS further shows that debt payment grace period for Kenya has stagnated at 4.5 years down from 6.9 years in 2016 and 10 years before President Uhuru Kenyatta took over from Mwai Kibaki.
The low grace period exerts pressure on the country’s debt obligation, forcing it to either borrow to repay maturing debt or negotiate for rollovers.
Both local and international experts have on various occasions criticised the country’s debt management strategy, with the World Bank blaming it for paying lip service to its framework on prudent debt management.
In a report titled Country Policy and Institutional Assessment 2017 released September last year, World Bank faulted Kenya for always publishing impressive debt management plans yet it does not follow through with implementation.
“Although on paper the Medium-Term Debt Management Strategy provides a framework for prudent debt management, it is not clear that it is being followed, considering the sovereign debt trajectory that has kept increasing at a sustained pace over the past years,” the report read.
These sentiments were echoed by the International Monetary Fund last week during the seventh Africa Fiscal Forum. IMF director of fiscal affairs Vitor Gaspar asked Sub Saharan Africa economies to consider reviewing their debt management plans and ensure they are implemented.
In Kenya’s 2019 MTDS currently before Parliament, the exchequer proposed several measures including increased issuance of domestic medium to long- term debt.
According to Treasury PS Kamau Thugge, this is aimed at reducing the refinancing risks associated with the short-term debt and also improve trading in the secondary market through increased volumes.
It has also planned to cut on foreign denominated loans whose refinancing cost can is high and unpredictable due to currency fluctuations.
