This archive report was first published on 8 January 2020.
Kenya's public debt has reached alarming levels, with the ratio of total public debt to GDP surging to a record high of 62.3% in June 2022, up from a record low of 38.2% in 2012.
Economists warn that this high level of debt poses a significant risk to the country's economic stability, as it diminishes government expenditure on essential services such as healthcare, education, and social empowerment programs.
However, public debt is not inherently harmful if the borrowed funds are invested prudently in development projects that promote economic growth, stability, and alleviate poverty.
For instance, in the United States, public debt-to-GDP was 105.5% as of September 2022, with two-thirds of the debt held by US citizens, banks, corporations, and the Federal Reserve Bank, and the rest held by foreign countries, particularly China and Japan.
Japan, the third-largest economy, has a staggering debt-to-GDP ratio of 246.1%, but issues debt in its own currency, has a flexible exchange rate, and controls its central bank, greatly diminishing the chance of plunging into a debt crisis.
Kenya can learn from these examples and prudently manage its debt to avert an economic crisis. The government can make public the borrowed funds and enforce accountability in their use, while also improving tax collection and reducing corruption.
