NAIROBI, Kenya
Kenya borrowed an average of Sh2.43 billion every day last year and paid commitment fees on loans yet to be disbursed or planned for, pushing total debt to Sh6.69 trillion as at June 30.
This means President Uhuru Kenyatta’s government has multiplied
public debt almost four times since it came to power in 2013 when the country’s
total public debt was only at Sh1.6 trillion.
The office of the Controller of
Budget made this revelation in the National Budget Implementation Review Report
dated August was seen by the Star.
According
to the COB, Treasury grossly violated the debt management procedures to pile
unnecessary debts that will see taxpayers pay dearly.
The
Margaret Nyakang'o's office said project planning and approval should precede
sourcing for funds. It added that borrowing can only be done when a programme
or activity is already scheduled to commence.
"Review
of the external debt payments shows instances where the government continued to
pay regular loan commitment and management fees for loans that were yet to be
disbursed long after the execution of loan agreements,’’ the report notes.
"Continued
payment of obligations on undisbursed loans is not prudent and does not meet
any value for money considerations".
Disaggregation
by external and internal debt reveals that the former grew by Sh492.67 billion
while the latter grew by Sh393.1 billion.
Even
so, despite the growth in the total loan portfolio, there was a decline in
repayment compared to 2018-19 when two commercial loans amounting to Sh179.3
billion became due.
The
actual expenditure of public debt amounted to Sh717.65 billion during the year
under review, representing 92.1 per cent of the revised gross estimates and
45.6 per cent of the ordinary revenue for the year.
The
revised allocation towards repayment of public debt in 2019-20 amounted to
Sh778.85 billion representing a decline of 8.2 per cent from Sh848.3 billion
allocated in the previous financial year.
This
allocation comprised of Sh532.5 billion and Sh253.35 billion for internal and
external debt respectively.
The
internal debt comprised Sh301.81 billion for interest payment and Sh223.68
billion for redemptions. On the other hand, external debt comprised of Sh131.87
billion towards payment of interest and Sh121.48 billion for redemption.
This
is not the first time Treasury has been called out for its debt accumulation.
In
2018, the International Monetary Fund chided the government, saying the
structure and volume of the country’s debt have important implications for debt
management.
IMF
said that although private debt has been a small proportion of total external
debt, debt service payments on this debt have been almost as high as those on
official debt. Moreover, the terms of payment have become increasingly hard,
suggesting that debt service payments will rise in the future.
"On
the basis of these observations, Kenya’s debt management should concentrate on
removing the possible debt overhang by reducing the debt burden through
market-based instruments, available restructuring schemes and appeals for
write-offs," IMF said in 2018.
The
findings by the budget office put to question rosy debt management policies
published by the exchequer annually even as the country continues to wallow in
debts that have since hit 64 per cent of Gross Domestic Product.
In
the pursuit of reducing vulnerabilities to risks of public debt, the National
Treasury formulated a debt policy in November last year that was to see the
formation of two bodies to oversee international and local borrowing.
It
was to delegate operational decisions on borrowing and debt management
to the Public Debt Management Office (PDMO), which has since been created.
It was also supposed to set up a Government Securities Auction Committee (GSAC)
to review and approve auction results.
Yet
the country’s annual borrowing spree is expected to cross the trillion-shilling
line this financial year, with over Sh400 billion borrowed in six months since
March to absorb coronavirus shocks.
In mid-May, the country received
Sh106 billion from the World Bank, a week after the IMF disbursed a Sh79
billion facility to help Kenya fight the effects of Covid-19.
This
is likely to push the country’s stock of debt to Sh7.7 trillion by end of June
next year, only Sh1.3 shy of the Sh9.1 trillion limit set last year.
Treasury
expects to borrow from both local and foreign investors had initially been
estimated at Sh898 billion. The projected fiscal deficit, or budget hole,
excludes grants from donors.
But
in the draft Budget Review and Outlook Paper (BROP), this has been revised
upwards due to the poor business environment that saw Kenya Revenue Authority
collect less tax last year.
The
country's budget deficit is expected to rise to 8.9 per cent in 2020-21, which
is higher than the eight per cent registered last year, further narrowing the
country's borrowing limit.
The
poor debt management and high accumulation continue to expose the country to
default, with major international agencies downgrading its creditworthiness.
In May,
the IMF raised Kenya’s risk of debt distress to high from moderate due to the
impact of the coronavirus crisis. - The Star
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