Kenya To Face Economic Certainty As Investors Poke Holes On Gov’t Borrowing
Investors predict that President William Ruto’s plan to borrow more after withdrawing the Finance Bill will hurt Kenya’s economy.
According to an analysis by Africa Report, Kenya’s capital costs may rise as a result of the decision to borrow more and the uncertainty surrounding the figures prior to a final settlement on July 5.
During a roundtable interview, the President stated that Kenya would have to borrow Ksh1 trillion to cover the budget deficit following the withdrawal of the Finance Bill in 2024.
However, on July 5, the President later stated that Kenya’s total debt in the fiscal year would be Ksh766 billion, with Ksh169 billion being required to bridge the gap.
Furthermore, investors have predicted that the government will default on some of its loan obligations as the country struggles with a difficult economic situation.
As things stand, investors have either raised interest rates or withheld capital, anticipating that the Kenyan government will likely borrow to cover its shortfalls.
Furthermore, the investors predict that private borrowers will suffer as local commercial lenders reduce the amount advanced to regular clients looking to capitalise on a government opportunity that may arise.
According to analysts, lenders prefer to make loans to governments rather than private individuals, who are more likely to default.
Furthermore, the report cited the recent sale of a bond as evidence that the government may return to the markets to meet its needs.
Last week’s tap-sale bond auction for Ksh20 billion underperformed, raising only Ksh486 million.
The additional borrowing now widens Kenya’s fiscal deficit from targeted 3.3% of its GDP to 4.6%. This creates uncertainty around its IMF programme. By @HeraldAloo https://t.co/vc20L0WGqx
— The Africa Report (@TheAfricaReport) July 8, 2024
“We see this underperformance of the tap-sale as a consequence of the recent developments where the government anticipated to borrow almost Ksh1trn in the 2024/25 budget,” the Africa Report quoted an expert featured in the article.
Adding to the uncertainty, Kenya is expected to submit a new debt servicing plan to the International Monetary Fund (IMF) following the withdrawal of the contentious Finance Bill, 2024.
Kenya To Face Economic Certainty As Investors Poke Holes On Gov’t Borrowing
