Kenya's Public Debt Hits New High As Ruto Borrows Ksh303.2 Billion

Kenya’s Public Debt Hits New High As Ruto Borrows Ksh303.2 Billion

Kenya’s debt burden has risen to an unprecedented Ksh10.5 trillion after President William Ruto’s administration took on new loans totaling Ksh303.2 billion in the fiscal year ending June 2024.

The national debt rose by Ksh303.2 billion in three months, highlighting the government’s continued reliance on external financing to fund key projects.

The increase in borrowing raises concerns, especially as the country prepares for a projected debt of Ksh13.11 trillion in 2028.

This week, Parliament received a Treasury report outlining how the loans were obtained from both multilateral and bilateral lenders to fund projects in critical sectors such as health, energy, and MSMEs.

Although these loans are necessary for development, they add to an already unsustainable debt burden.

According to the report, external debt accounts for 48.9 percent of total debt, totaling Ksh5.171.7 billion, with domestic debt contributing the remaining Ksh5.410.3 billion.

While the debt-to-GDP ratio fell slightly to 65.7% from 72.5%, this was largely due to the Kenya shilling’s appreciation against major foreign currencies, providing a temporary reprieve in a looming fiscal crisis.

The report also states that government-guaranteed debt has decreased from Ksh170.2 billion in June 2023 to Ksh100.2 billion in June 2024.

Among the loans secured, the International Development Association (IDA) provided a loan of Ksh20.6 billion to improve primary healthcare services.

Kenya has tapped US$1.2 billion financing from the World Bank through Development Policy Operation (DPO) VI.

Funding breakdown:

1. US$850.0M is credit from IBRD
2. US$300.0M is credit from IDA
3. US$50.0M is a grant from IDA

Here's the fine print of this financing & what… pic.twitter.com/xSqFb4jh1G
— Julians Amboko (@AmbokoJH) May 31, 2024

Another loan from IDA, worth Ksh39.7 billion, aims to improve transparency and efficiency in public finance while also increasing labor market competitiveness.

While such projects are beneficial, they put additional strain on a budget that is already stretched thin due to previous borrowing.

The government’s ambitious energy expansion programme resulted in the signing of a Ksh5.8 billion loan with the IDA for renewable energy integration and strengthening Kenya Power’s capacity for energy trade.

This green energy initiative is consistent with global sustainability goals, but the repayment terms—beginning in 2029 and extending until 2058—raise concerns about the long-term economic burden.

The International Bank for Reconstruction and Development (IBRD) will provide a significant Ksh109.8 billion loan to fund fiscal sustainability projects aimed at boosting resilient growth.

Meanwhile, the African Development Bank approved a Ksh14.8 billion loan for high-voltage network upgrades, indicating a push for a dependable green power supply.

These loans demonstrate the government’s strategy of obtaining external financing to accelerate infrastructure development.

ALSO READ:

However, the rising debt stock corresponds with President Ruto’s warning that borrowing would be required to keep the government running after the proposed 2024 Finance Bill was met with strong opposition.

The bill sought to raise Ksh350 billion through tax measures, but it was rejected due to widespread protests, forcing the government to borrow more money to close financial gaps.

With the debt expected to reach Ksh13.11 trillion by the fiscal year 2027/2028, concerns about Kenya’s fiscal health grow.

The country faces an uphill battle to balance necessary development with managing its rising debt obligations.

Kenya’s Public Debt Hits New High As Ruto Borrows Ksh303.2 Billion

Tags: William Ruto