NAIROBI, Kenya – The government has surpassed its approved borrowing limit by Sh220 billion in the current financial year, sparking concerns over rising debt and potential economic instability.
Appearing before Parliament’s Finance and National Planning Committee, Treasury Principal Secretary Chris Kiptoo admitted to the excess borrowing, attributing it to delays in foreign financing.
“As of yesterday, we had borrowed Sh624 billion from the local market. This is due to delayed foreign financing,” Kiptoo told MPs.
The National Assembly had initially capped domestic borrowing at Sh761 billion, with plans to raise Sh263.2 billion locally.
However, following the rejection of the Finance Bill, 2024, which had sought to generate Sh344.3 billion in additional revenue, the government revised its borrowing target upwards by Sh141.4 billion.
MPs raised alarm over the government’s increased reliance on costly local commercial loans, warning that it could crowd out private sector credit and push up interest rates.
“There is too much balancing at the National Treasury occasioned by over-projections on revenue. We borrow to pay debts,” said Baringo North MP Joseph Makilap, criticizing what he termed as fiscal indiscipline within the Treasury.
Local banks remain the primary lenders to the government, holding 45% of government securities, followed by pension funds at 32%.
This shift toward domestic borrowing comes despite the Treasury’s own 2024 Budget Policy Statement (BPS), which prioritizes concessional loans over expensive commercial borrowing.
Kenya’s tax revenue as a share of GDP has dropped from 18.1% in 2013/2014 to 14.3% in 2022/2023, even as government expenditure continues to rise.
This has widened the budget deficit and fueled further borrowing.
The National Assembly’s Budget and Appropriations Committee has previously cautioned against excessive domestic borrowing, noting that it drives up interest rates and makes credit more expensive for businesses.
“Interest rates on Treasury bills have surged, with 91-day and 182-day T-bill rates rising from 9.76% to 16.68% and 10.06% to 16.86%, respectively,” the committee warned in its latest report.
Such high rates incentivize banks to lend to the government instead of businesses, potentially stifling private-sector investment and job creation.
Legislators are now demanding stricter adherence to borrowing limits and a shift towards sustainable debt management.
The revelations have put the National Treasury under intense scrutiny, with mounting pressure to curb runaway borrowing and align with the country’s long-term fiscal goals.
“We expect to live within our means; the approved deficit,” Kiptoo assured MPs.
However, with continued revenue shortfalls and rising debt obligations, economic analysts warn that unless the government reinforces fiscal discipline, Kenya risks further financial strain in the coming years.
