This archive report was first published on 31 October 2019.
Published on October 31, 2019, the World Bank's Kenya economic update highlighted the country's growing debt burden. The international lender noted that Kenya's public debt stock has increased by 3.2% of GDP in the 2018/2019 financial year, leading to fiscal pressure.
The amount set to mature in the next one year is equivalent to 82.3% of the total KSh 1.496 trillion collected by the taxman in the last financial year. This has prompted the World Bank to raise a red flag, warning that Kenya could face challenges in repayment if the cap on interest rates is not removed by Parliament.
According to the World Bank, 43% of the KSh 2.87 trillion public domestic debt is owed to local investors and will have to be settled in 2020 by taxpayers. The bank has advised Nairobi against raising the public debt ceiling, citing concerns about the country's ability to pay back loans.
Parliament, however, ignored the World Bank's advice and voted to increase the country's debt ceiling to KSh 9 trillion from KSh 7.5 trillion set by the Parliamentary Budget Office. The country's total debt surpassed KSh 5.9 trillion in October 2019, raising concerns about its ability to pay back loans.
The World Bank has cautioned that debt service obligations will continue to impose significant fiscal strain on the exchequer. Kenya could face fiscal pressure in meeting its near-term debt and repayments obligations, the bank warned.
