This archive report was first published on 3 November 2019.
Kenya's debt burden has reached alarming levels, threatening the country's economic stability. As of 2018/19, the debt portfolio stood at Sh5.8 trillion, nearly twice the national budget and representing 62.3% of the GDP.
According to the National Treasury, about 43% of debt from the local market matures next year, raising concerns about the government's ability to pay back its debts. This is a recipe for disaster, as inability to retire debts sends negative signals to the market and puts a country in bad books internationally.
The government's high debt crowds out cash for capital development, leading to cyclic borrowings. This is exacerbated by the fact that some of the borrowed cash is embezzled and therefore never serves the intended purpose.
Kenya's debt has grown astronomically in the past seven years, from Sh1.9 trillion in 2012 to Sh5.8 trillion in 2018/19. This is a significant increase, considering that the debt ratio to the GDP should not pass 50% according to international best practice.
The Jubilee administration has been criticized for its profligate spending, which has pushed large-scale infrastructure projects with minimal returns on investment. The Standard Gauge Railway from Mombasa to Nairobi, built at a cost of Sh327 billion borrowed from China, is a classic example of such a project.
Several other mega projects, such as the Galana-Kulalu irrigation scheme at the Coast, have also come a cropper. The government must take urgent action to address the debt crisis, including cutting costs, expanding productivity, tightening financial management, and fixing corruption.
