Kenya’s Ballooning Debt Unsustainable

Kenya’s debt burden has soared to Sh3 trillion ($29.6 billion)–and it is growing rapidly as fears of more taxation for Kenyans increase.

In a period of six months this year, the Jubilee government borrowed Sh226 billion making Kenya’s total foreign debt the highest in the region, Investmentnews reported.

The national assembly was told during the six-month period that the country signed 18 loan agreements to finance various projects, including:

Sh60 billion from the Chinese “to ease the cost of doing business” in the country, and

 Sh20 billion syndicated facility to help revive the troubled national carrier, Kenya Airways.

The United Nations warned that Kenya is among the African countries whose debt burden is unsustainable. In a report titled Economic Development in Africa Report 2016, the UN Conference on Trade and Development advised the country to reduce its reliance on external funding as “the external debt continually looks unsustainable”.

In May, the International Monetary Fund also raised the red flag over the country’s growing Chinese loans, which notably, form a huge chunk of the report tabled in the national assembly.

The government proposes to spend Sh466 billion on public debt repayments in the financial year starting next month, effectively committing a fifth of the budget to repay loans.

According to the World Bank increasing debts from China will impact heavily on Kenyan tax payer. Tax collection, fell Sh69 billion below target for the nine months to March 2016.

The IMF has also urged Kenya to minimize reliance on oil whether for fiscal purpose or export as the country gears towards the Early Oil Pilot Scheme project.

Director for the African Department, at the IMF Abebe Aemro Selassie urged Kenya to maintain the diverse economic structures that they have.

He said, Kenya should learn lessons from oil exporting countries in the continent and maintain diverse economic structures.

“I think the number one thing that you keep hearing from countries in West Africa, other oil exporters right now, is the importance of maintaining a diversified economy. Those countries are emphasizing that they wish they had much less reliance on oil exports,” he said.

Oil dependent countries have registered slowed growth following the drop in oil prices.

Kenya will start exporting oil in June 2017.

Caption

The IMF has urged Kenya to minimize reliance on oil.