Kenya is building a potentially dangerous mountain of debt that could in the long run expose the economy to systemic risks, the World Bank has warned in a newly-released report.
The World Bank warns in the report that while Kenya’s public debt remains sustainable, the margin for further debt accumulation is narrowing at an uncomfortably rapid pace and exposing the country to potentially difficult times ahead if the borrowing spree is not tamed.
“Although public debt remains sustainable, margins for manoeuvre are rapidly narrowing,” the bank says in its latest economic update on Kenya that was released on 31 October
The warning runs contrary to the Treasury’s position that the national debt is manageable and that there is room for accumulate more debt without compromising economic growth.
Kenya’s public debt increased from 42.1 per cent of GDP in 2012/13 to 55.1 per cent of GDP in 2015/16, on the back of a massive increase in development spending.
The World Bank says the situation is further compounded by the fact that growth in public expenditure has far outstripped growth in revenues, creating a major imbalance.
“Revenue is projected to grow by 2.3% in 2016/17 to 21.3 % of GDP compared to 19% GDP in 2015/16. Expenditure, on the other hand, is projected to increase by 3.7% of GDP during the same period,” the report says.
An ever expanding fiscal deficit, which is projected to be higher in 2016/17 should also be a cause for worry, the bank warns, adding that contrary to the expected decline in the fiscal balance as proposed in the 2016 Budget Policy Statement, the 2016/17 Budget suggests an increase in the fiscal balance to -9.4% of GDP compared to -7.2% of GDP in the previous fiscal year.
The warning comes as the Treasury is preparing for fresh foreign borrowing – partly to finance the Sh691.5 billion deficit in this year’s Sh2.2 trillion budget.
Tunaambiwa tulipe ushuru tujitegemee yet we continue borrowing more and more. By the way Mr. Okiya, does our country have a borrowing policy for these loans?
@The_Virus its complicated.
KRA estimated 2016 collection Sh1.21 trillion.
Estimates of what Kenya needs:
Mombasa - Nairobi SGR cost KES327 billion (Kenya paid 10% upfront, the balance is a loan and Insured from Raira/Kamwanas Political manenos)
Nairobi-Naivasha Standard Gauge Railway cost KES151.5 billion
My Opinions:
The truth is their is surplus money in Western economies and China. They bet on giving us loans and are profiting from it; they haence push it. For instance, the insurance company that has insured our Mombasa - Nairobi SGR cost KES3.27 trillion earned billions for the whole life of the repayement! CBK is supposed to have the means to use the fiscal policy (fiscal policy is the use of government revenue collection (mainly taxes) and expenditure (spending) to influence the economy) to control borrowing.
Kenya’s Central Bank is not in a position to make any monetary decisions (their job:the supply of money, often targeting an inflation rate or interest rate to ensure price stability) since they do not control the foreign exchange (they think so), it is a recycled with cronies of former employees, yaani is a cash fluch parastatal
Uhuru hajui loan ni nini
The Parliament has the power to CONTROL KENYA’S BORROWING; but with Tyranny of Mamas and Baba wa Taifa katiaring all the M.P. this will NOT HAPPEN. Also, this people are not intelligent enough to see the effects of spending. But, Kenya still needs to spend on all this infrastructure. How will the Mzungu reach the mines in Congo? [B]Cointainers are too slow.
All our Tax collections goes to paying wages. 161. 9 billion in the current financial year. [/B]Then this people tell their wives to handle the house chores with that SALARY FOR budget and go seeking NEW WAYS ON HOW TO KULA NYAMA! Kenya’s current wage bill stands at 53 percent of the national budget. Kenya’s workforce now stands at a staggering over 700,000 employees. Interesting our company has 45% as The Republic of Kenya vis - a vis Private Companies
NOTE: I did not use kamwana et al’s name to say he is ruining the Country. Niko DP