The Current Kenya National Debt

  

Date Posted: 2/9/2018 3:49:35 AM

Posted By: simpleman Anto  Membership Level: Silver  Total Points: 162

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Kenya National Debt
It has been all over media and campaign forums that the public debt is increasing beyond the economic levels. Some have claimed that as it stands right now, every Kenyan has a debt of at least Sh. 90,000. To a certain degree, the increased prices for essential commodities such as maize flour have been linked to the skyrocketing national debt. The latest borrowing by the Kenyan government has increased the national debt to Sh4.5 trillion where 2.2 trillion accounts for a domestic debt while 2.3 for an external debt as per the Central Bank of Kenya. The situation is worrying for a taxpayer who feels their funds is being misused.

Currently, the debt to Gross Domestic production ratio stands at approximately 52.7% which implies that the country is borrowing more than it can produce. Therefore in my opinion, if the situations persist, our current economic conditions would not be able to withstand the debt in the long run. Kenya is a developing country, and according to International Monetary Fund (IMF), national debt as a percentage of GDP for an emerging nation should not go beyond 40%. Already Kenya's has surpassed the threshold by 12.7%. The country also has a series of loans to pay that exerts a lot of pressure on the government. For instance, a syndicated loan of Sh7.6 billion (750 million USD) borrowed in 2015 has matured calling for repayment. The 2billion Euro bond will be due in 2024 with additional credit following suit which is more likely to sink the local production and manufacturing sectors.

Statistics reveal that the debt is increasing more than the Gross Domestic Production (GDP). Using the period between 2010 and 2016 as an example, the public debt in 2010 was Sh1, 774,500 million and Sh3, 708,700 million in 2016. An increase

of Sh1, 934,200 representing 109% increase. On the contrary, GDP 2016 was Sh7, 053,000 million while that of 2010 was Sh4, 000,000 million indicating a difference of 3,053,000 representing a percentage increase of 76.3%. From an economist point view, such trend cannot be sustained in the long run.

Similarly, the country operates on a deficit or negative balance of payment (BOP) defined as the difference between the value of total exports and imports. Kenya imports more than it exports thus challenging its ability to service substantial public debt. In the fiscal year 2015-2016, the value of total exports was Sh50.875 billion whereas imports were 138.151 billion. This is a clear indication that we exports are more than twice the imports.

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