IMF to visit Kenya over its spiralling public debt likely to dent country's image
Kenya’s public debt currently stands at Ksh4.4 trillion ($44 billion), or 54 per cent of GDP way above the recommended quota of not more than 50 per cent of the GDP.
As a result IMF will be sending an economic review team to Kenya this month in a bid to arrest the situation amid growing concerns over the spiralling country’s public debt, which could have a negative impact on the economy and slows down delivery of infrastructure projects.
The IMF has already asked the government to seek ways to reduce the country’s fiscal deficit — the gap between expenditure and revenue — in order to address debt vulnerability.
“You reduce the deficit by growing the revenue base, and also looking at spending. Infrastructure development is necessary but you need to examine how you select projects ... to ensure cash allocations go to the most productive ones,” IMF representative to Kenya Jan Mikkelsen said.
Economists and financial analysts fear the country’s huge public debt could cross the tipping point soon if left unchecked.
According to the controller of budget fiscal year report for 2016/17, the total expenditure by the National Government was Kshs.1.96 trillion, of which recurrent expenditure at Kshs.1.36 trillion and a paltry Kshs.602.3 billion allocated for development.
President Uhuru Kenyatta and his deputy, William Ruto, are among the most extravagant government officials with the duo blowing away Sh1.73 billion on parties and receptions last year alone
China is Kenya's leading lender and advanced bilateral loans worth Sh487 billion ($4,733.94 million) to the country last year alone.
International rating agency Moody’s has also raised the red flag over the country’s debt levels and even warned it could downgrade Kenya’s credit rating in its next review, a move that would jeopardise Kenya's chances to access the international market even as it plans a second sovereign bond in the current financial year.
In a report released a week ago, Moody’s noted that Kenya had a higher debt burden and weaker debt affordability metrics than countries that have defaulted in Asia, Latin America and Europe.
The bulk of loans goes to fund mega projects and it remains to be seen if the country will benefit from the projects since most of it is only being used to move human capital and not manufacturing products.
With the economy growing sluggishly after a prolonged election and collections by the Kenya Revenue Authority still below target, the government may cut back on projects layouts choosing to only go ahead with projects that promise the highest return.
The government through the Treasury ministry has however dismissed claims of over borrowing stating that the country still has room to take in more debt up to 74 per cent of its GDP.
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