Kenya’s loan at sh. 5trn.

Kenyan currencyBy Alex Muriithi

Kenya is largely developing,new government infrastructures been undertaken daily as away of developing the country,the country is not in a position to cater for these vast developments we are witnessing day and night,meaning that the government has gone a stride further in securing external loans from various world organizations that lender money eg, world bank.

We are all familiar that a debt has to be paid, but the Kenyan public loan margin has hit Sh. 5 trn something never experienced in Kenya since it gained independence not only Kenya but also the third world countries.

Today marks the beginning of anew financial year to Kenyans as thy await the draft budget of year 2018/19 to be tabled before the Parliament this afternoon by the finance cabinet secretary Henry Rotich this afternoon. This pauses a lot of questions to Kenyans on how the finance minister will cut through the budget to secure enough funds to layoff the debt.

Official statistics indicate that the rise in the debt pile up was mainly from external borrowing, which has a total outstanding foreign debt to Sh2.563 trillion as at the end of February this year.

Kenya’s multilateral debt was at 54.7 per cent in 2014 but has now dropped to 44 per cent. Bilateral debt stood at 27 per cent but has risen to 30 per cent while commercial debt is up from 0.6 to about 10 per cent of total public debt rising an alarm to economists .

Economists have noted that main concern is the rising of the commercial debts while the ration of cheaper multilateral debt continues to fall.

John Mutua ,the programme officer at the institute of economic affairs has it that,“Multilateral debt has been going down since 2014, even as bilateral and commercial debt continues to rise. Ordinarily, common sense demands that we should take more cheaper multilateral debt and reduce our exposure in the expensive commercial debt market,carrying more commercial debt means interest payment will soon become our biggest challenge in public debt management. Kenya’s official policy is to go for concessional loans, but we haven’t managed that very well.We should be seeing more work on upping revenue mobilization and curbing expenditure. Let’s have projects management and appraisal that ensure we have better yields. And let’s go for longer-term debt with low interest payments.”

The standard gauge railway has got a larger share on the bilateral loan as it has been highly financed by the Chinese who are also the contractors.

Genghis capital has said that, “The external debt redemptions will feature significant maturities in Standard Chartered syndicated loan (Sh78.74 billion) and 5-year debut International Sovereign Bond (Sh78.30 billion). Overall, public debt redemptions will comprise 54.06 per cent of total public debt obligations in fiscal year 2018/19.”

A major cause of the increase in public debt last year were as a result of the presidential election rerun, drought and famine that hit the country leading to importation of food.