This archive report was first published on 12 June 2020.
Kenya's government has announced plans to borrow locally to fund its budget deficit, a move that could have far-reaching implications for the country's economy.
According to the 2020/21 budget speech delivered by Cabinet Secretary Ukur Yatani, the government aims to reduce its reliance on expensive commercial loans, which have contributed to the country's growing public debt.
Yatani stated that the government will source Sh494 billion of the loan locally and Sh347 billion from the external debt market, with the goal of cutting the budget deficit in the medium term to slow the borrowing rate.
Kenya's debt appetite has raised concerns among both local and international observers, with the International Monetary Fund (IMF) recently raising the country's risk of debt distress to high from moderate due to the impact of the coronavirus crisis.
As of April 2020, cumulative ordinary revenue collection was Sh1.35 trillion, which is almost 20 per cent below the target, highlighting the need for the government to be cautious about future debt accumulation.
Yatani emphasized the importance of strengthening the management of public debt to minimize cost and risks, while accessing external concessional funding to finance development projects.
Kenya's total debt is currently at Sh6.3 trillion, according to the Central Bank of Kenya, and the government's move to borrow locally may have implications for individuals seeking loans, as many lending institutions may view these loans as high-risk.
