Kenyan lawmakers are pushing for a change in legislation to support new debt of Ksh 4 trillion ($35.39 billion) to fund a growing budget deficit amid warnings that the country is headed for the over-indebtedness.
Kenya’s National Treasury is considering options for financing an 846 billion shillings ($7.48 billion) shortfall in its 3.2 trillion shillings ($28.31 billion) spending plan for 2022/ 2023.
MPs are now pushing for a change in the law to increase the government borrowing limit to 13 trillion shillings ($115.04 billion) from 9 trillion shillings ($79.64 billion). dollars), the second increase in less than three years even as the public debt reached 8.020 billion shillings ($70.97 billion). ) in December 2021.
Two political parties in parliament – Azimio la Umoja led by President Uhuru Kenyatta and ODM leader Raila Odinga and Kenya Kwanza Alliance led by disgruntled Vice President William Ruto – fought over the proposal.
This week, Azimio MPs managed to pass an amendment to Fiscal Policy Statement 2022/23 asking the Treasury to amend the Public Financial Management Act to help address the budget shortfall.
They also quashed a Budget and Appropriations Committee report that had imposed a 400 billion shillings ($3.53 billion) cap on debt to avoid breaching the 9 trillion shillings ($79.64 billion) cap. billions of dollars).
Read: World Bank loans rise as loan deals between Kenya and China shrink
In 2019, Kenya exceeded the East African Community debt ceiling after its MPs voted to raise the limit to Ksh 9 trillion ($79.64 billion), undermining the attempt government to comply with the region’s debt target of 50% of GDP and weakening the country’s debt sustainability indicators. .
Kenya’s non-concessional loans have increased fiscal vulnerabilities and interest payments to almost 20% of revenue.
The Parliamentary Budget Office (PBO) says the country has exceeded debt sustainability thresholds, particularly the debt service-to-revenue ratio, implying that the economy is not generating enough revenue to cover its payments of debt.
“The risk is that the country will continue to borrow to pay off existing debts and not for development spending as required by law,” the PBO said.
In 2021, the International Monetary Fund rated Kenya’s risk of external debt distress and overall risk of debt distress as “high”. Kenya’s public debt as a share of GDP was 66.2%, down from 48.6% in 2015.
Over the past decade, growth in interest payments has exceeded growth in exports. But the National Treasury accuses Covid-19 of risk of over-indebtedness.
“Debt sustainability ratios have deteriorated following the adverse effects of the Covid-19 pandemic on the economy,” he said.
Kenya’s outstanding public and publicly guaranteed debt stood at Ksh 8.02 trillion ($70.97 billion) as of December 2021. This included Ksh 4.03 trillion ($35.66 billion). of domestic debt and Ksh 4.17 trillion ($36.9 billion) of outstanding external debt.
In Tanzania, there has been a growing chorus against a debt binge by the Samia administration, a debate that earlier this year saw former Speaker of the National Assembly Job Ndugai expelled for his criticism of “excessive” loans from President Samia Suluhu.
Read: Samia hints at cabinet reshuffle and slams critics
Read also: Tanzania at risk of over-indebtedness: the World Bank
Tanzania’s outstanding national debt stood at $37.57 billion at the end of January this year, an increase of $133.2 million from December 2021 and $6.27 billion from compared to the amount recorded in January 2021. External debt represented 75.4% ($28.17 billion) of the national debt stock. . Of the external debt, 33% ($9.29 billion) are commercial loans.
Ugandan ‘bad’ loan
Tanzania’s debt service payment amounted to $17.6 million, including $9.7 million for principal repayment.
In Uganda, a leading Chinese lender has imposed “aggressive” repayment terms on a $200 million loan to expand Uganda’s Entebbe International Airport.
Read: China imposes ‘aggressive’ conditions on Entebbe airport loan, researchers say
Under China’s Exim Bank loan to upgrade Entebbe airport, the Ugandan government is required to channel all revenue from the country’s only international airport into an account jointly held with the lender. The government is then required to use a portion of the revenue to repay the loan each year before it can invest in public services.
The state-owned China Communications Construction Company started repairing runways and building new hangars in 2016 and work is expected to be completed this year.
Provisional data from the Bank of Uganda shows total government debt outstanding as of October 2021 stood at Ush 73.78 trillion ($20.72 billion) while exposure to external debt was $12.78 billion during the period.