Treasury Cabinet Secretary John Mbadi says the Kenya Kwanza government has faced several fiscal challenges since it took over the mantle in 2022.
Speaking to members of the Bunge la Mwananchi on Monday, February 3, 2024, Mbadi said the government was struggling with the issue of public debt as of 2022
“In 2022, there were a lot of challenges. One of them, which is very critical, is the issue of public debts, which have a rising cost. This government took over at a time when the budget deficit, as per the budget estimates of 2022/2023, was Ksh925 billion. Imagine an economy like Kenya borrowing a quarter of its budget every year to finance its activities,” Mbadi stated.
According to data from the Central Bank of Kenya (CBK), as of June 2022, public debt increased by Ksh891.6 billion from Ksh7.7 Trillion in June 2021 to Ksh8.6 trillion in June 2022 or 67.3 percent of GDP.
As at end June 2022, the external and domestic debt accounted for 50.1 percent and 49.9 percent of total debt portfolio respectively. Most of the external debt portfolio comprise loans on concessional terms while domestic debt has gradually shifted to medium to long term.
“This government took over when the government was already showing signs of defaulting in paying Eurobond which almost caused economic meltdown in this country. The shilling traded to Ksh160 per US dollar because of the signal that was sent to the economy that the government was going to default,” Mbadi added.
“We will only have a breathing space between 2034 and 2048 because in May 2027 there is going to be a Eurobond of USD 900 million to be paid. In February 2028, we are paying another Eurobond of USD1 billion which was taken so many years back. In 2029 its USD1.2 billion, in 2031 we are paying USD1.5 billion and in 2034 we have another USD1.2 billion.”
Mbadi on state of economy
Mbadi, who admitted that the country is not doing well economically, promised that the government is striving to repay the Eurobonds before the deadline, to avoid sinking the economy further.
“we are not doing okay but we are better than yesterday. There is this rating from the Moody’s, some people think it is heresay. The credit rating is all about the ability of a country to repay its debts. That can only be assessed through certain fundamentals. The key fundamental is inflation rates. Our inflation rates have shown signs of coming down. It was 9.6 per cent in October 2022. That has come down now to 3.3 per cent,” he added.
Mbadi also says that the government has reduced interest rates on its borrowing through Treasury Bills from 15 per cent to 9 per cent currently.
He also revealed that to cushion the country from insufficient foreign reserves, the CBK has USD9.5 billion.
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