This archive report was first published on 14 October 2019.
The World Bank has sounded a warning over Kenya's decision to raise its debt ceiling, citing concerns that the move may plunge the country into debt distress.
As of June 2019, Kenya's public debt stood at Ksh5.9 trillion, comprising Ksh3.01 trillion in external debt and Ksh2.79 trillion in domestic debt. This represents a significant increase from Ksh1.894 trillion in June 2013.
According to the World Bank, the revised debt ceiling of Ksh9 trillion ($85.7 billion) approved by the National Assembly in October 2019 may lead to a public debt-to-GDP ratio of 70%, exceeding the threshold for low-middle income economies.
World Bank Chief Economist for Kenya, Peter Chacha, has urged the government to aim for a debt-to-GDP ratio of 55% in the medium term, citing concerns over the country's rapid uptake of loans.
The World Bank has ranked Kenya's debt as moderate risk, up from low risk in recent years, due to the government's increased borrowing. The lender warns that using debt financing to pay for consumption or unproductive assets risks plunging the country into a financial crisis.
