Kenya is expected to spend up to Sh640.8 billion in the current fiscal year to service its Sh5.3 trillion debt, the 2020 Economic Survey report shows.
The country’s total stock of public debt went up by 16.8 per cent as at the end of June 2019, from Sh4.5 trillion the previous year.
That also saw the external debt, which accounted for 57 per cent of the total debt, growing by 17.7 per cent to stand at Sh3.02 trillion.
The external debt stood at Sh2.56 trillion in 2018. The National Treasury saw its appetite for domestic debt rise by 15.7 per cent to Sh2.29 trillion.
Already, Treasury wants to change the country’s external debt composition by reducing concessional borrowing to 15 per cent in the 2020/21 financial year, from the current 34 per cent.
Treasury Cabinet Secretary Ukur Yatani proposes to increase commercial financing from four to 13 per cent in the financial year that begins in June.
This will see commercial borrowing increase to Sh274.4 billion from Sh313.1 billion.
China remains Kenya’s top creditor, with the debt growing by more than Sh100 billion between June last year and a similar period in 2018 from Sh560.5 billion to Sh661.05 billion at the start of the current financial year.
This was part of the money used to finance the standard gauge railway.
Kenya also saw its debt from Japan increase by 38.4 per cent to stand at Sh135.2 billion, from Sh97.7 billion.
The United States reduced its debt to Kenya to Sh2 billion from Sh2.6 billion in 2018. Washington’s debt to Kenya stood at Sh4.4 billion in 2015.
The amount owed to the International Development Association/International Fund for Agricultural Development rose by 12.7 per cent to Sh591.3 billion at the end of June 2019.
The country also the borrowing from the African Development Bank (AfDB) grow by 12.2 per cent to Sh229.6 billion; while the amount owed to the International Monetary Fund (IMF) dropped from Sh71.5 billion to Sh49.2 billion, the report said.
Kenya increased its borrowing from international commercial banks through syndicated loans to Sh471.7 billion at the start of the current financial year from Sh426.4 billion.
The National Treasury saw a rise in the international sovereign bonds to Sh624.01 billion from Sh479.98 billion a year earlier.
Kenya has issued three Eurobonds distributed in values of Sh275 billion, Sh200 billion and Sh210 billion.
The Sh200 billion Eurobond was issued on February 28, 2018 in two Sh100 billion tranches of 10-year at a coupon of 7.25 per cent and 30-year at a coupon of 8.25 per cent. The interest is payable on February 28 and August 28 of every year.
Taxpayers use Sh15.63 billion in interest payments just for this Eurobond annually.
Kenya’s outstanding debt to commercial banks rose by 10.6 per cent to stand at Sh471.7 billion; while the internal debt from treasury bonds and treasury bills accounted for 33 per cent and 18 per cent of the overall debt position, respectively.
The KNBS data shows that treasury bonds rose by 15.6 per cent to Sh1.74 trillion, while the treasury bills also recorded a rise of 26.7 per cent to Sh954.3 billion.
Kenya’s net servicing charges, on internal and external debt grew by 26.6 per cent to Sh842.4 billion in last year, while its receipts on interest and loan repayments rose by 37.6 per cent to Sh3.9 billion.
The net charges on external debt servicing grew by 50.7 per cent to Sh353.7 billion in the 2018/19 financial year; while net domestic debt servicing charges went up by 13.5 per cent to Sh488.8 billion, the report added.
Last year also saw Kenya’s ratio of external debt servicing charges to foreign exchange earnings from exports of goods and services drop.
These earnings are an indicator of the ability of the economy to service external debt. The debt servicing charges rose to 30.2 per cent compared to 20 recorded in 2018.
This means that the Treasury has breached the 21 per cent threshold set by the IMF.
The country’s public and publicly guaranteed debt has grown by an annualised rate of 19 per cent over the last 10 years.
This is due to an increase in expenditure, led by infrastructural investments and cost of government free services, shortfalls in revenue forecast and shrinking fiscal space as a result of increase in compulsory expenditure like debt servicing.