Kenya’s annual debt repayment is set to hit Sh618.5 billion next year, which will see the Treasury spend an estimated Sh40 out of every Sh100 collected from taxpayers on servicing the ballooning loans.
The repayment bill represents a 38.5 per cent jump from Sh446.4 billion spent on public debt this year compared to a projected 12 per cent growth in tax collection, which is a key indicator of the country’s ability to repay. the rate of tax collection has not matched new debt uptake.
The debt repayment load is double what is being spent to build the standard gauge railway (SGR) from Nairobi to Mombasa. It can also fully fund county governments for two years.
The amount is 11 times bigger than what the government spent on roads last year.
It almost matches the Sh673 billion that the State is planning to spend on development projects next year.
However, the government has barely exhausted 75 per cent of its development budget in recent years and if the trend continues, debt servicing will dwarf the entire amount poured into roads, rail, dams, power, ICT and other infrastructure.
Debt repayment remains the Treasury’s biggest budget item compared to essential expenditure lines like education and health.
Next year’s repayment amount is more than double the Sh282 billion that the State spent in the year to June 2013, indicative of the heavy loans uptake under the Jubilee government.
The country’s overall public debt currently stands at Sh3.5 trillion, up from Sh2.1 trillion in November 2013 at the end of former president Mwai Kibaki’s administration.
Kenya has also been flirting with the idea of floating another Eurobond but is yet to indicate if it will proceed with it. The International Monetary Fund (IMF) has warned that a Eurobond is comparatively expensive and should be financing of last resort.