NAIROBI, Kenya- Kenya is gearing up for another year of aggressive borrowing, according to a new Cytonn Investments report, sparking renewed concerns over the country’s mounting public debt.
With a Sh768 billion fiscal deficit—equivalent to 4.3pc of GDP—the government is expected to seek funds from both foreign and domestic markets to keep the economy afloat.
But here’s the kicker: this borrowing spree comes just a month after the International Monetary Fund (IMF) urged Kenya to tighten its fiscal policies to avoid deeper economic trouble.
Government’s Borrowing Spree
Brace for a surge in new loans. The Cytonn report indicates that the government will rely heavily on concessional financing from the IMF, the World Bank, and commercial lenders to bridge the budget gap.
While concessional loans typically offer lower interest rates and favorable repayment terms, excessive borrowing still raises red flags about long-term sustainability.
The IMF’s Deputy Managing Director Nigel Clarke, during his December visit to Kenya, underscored the need for stronger fiscal discipline.
“I encouraged the authorities to continue efforts to create the fiscal space needed to finance priority investment and social spending, and make further progress in investing in human capital and greater inclusivity,” Clarke noted.
Translation? The government needs to rein in spending and find ways to increase revenue without worsening the country’s debt burden.
Kenya’s Public Debt Hits Sh5.1 Trillion
Let’s talk numbers. According to the Kenya National Bureau of Statistics, the country’s external public debt stood at Sh5.1 trillion as of September 2024. That figure is only expected to climb as the government ramps up borrowing.
While policymakers argue that more loans are necessary to fund key infrastructure projects and social programs, critics warn that Kenya is treading a dangerous path.
With debt repayment obligations eating into development funds, questions linger about how sustainable this borrowing strategy truly is.
With borrowing on the rise and revenue growth underwhelming, the big question is: Can Kenya manage its debt without sinking deeper into a financial crisis?
The coming months will be critical as the government juggles budgetary pressures, lender conditions, and economic growth targets. Whether Kenya can strike a balance between investment and fiscal responsibility remains to be seen.
