The National Treasury is getting ready to present its request to Parliament to increase Kenya’s debt ceiling above Sh9 trillion, even as Kenyans protest Jubilee administration’s insatiable appetite for loans.
The Nation has learnt that the request will be in the House before the end of June for it to be processed alongside the new budget since it will be impossible to fund the new budget within the current borrowing limit.
This comes even as angry Kenyans on Monday went online to protest the latest Sh257 billion loan from the International Monetary Fund (IMF), asking the multilateral lender to cancel any additional loans until the government accounts for the previous loans.
By the end of November last year, the total public debt stood at Sh7.2 trillion. Going at the current pace of Sh120 billion per month, the debt will be at Sh8.7 trillion in December, and will have crossed the Sh9 trillion mark by June next year.
The 2021 Budget Policy Statement (BPS) projects that Kenya’s stock of public debt will hit Sh10.6 trillion by the close of June 2025.
This means that Kenya will have borrowed an additional Sh3.4 trillion adding to the current debt stock of Sh7.2 trillion at the end of November 2020, which implies a 45.2 per cent surge in new borrowing over the next five years.
Kenyans on social media have criticised international lenders such as the IMF and the World Bank for advancing the Jubilee administration more loans despite some scandals like the one at the Kenya Medical Supplies Agency.
“Have you ever cared to know how the loans you give to the Kenyan government are utilised? You are making individual billionaires while the rest of us keep suffering. Kenya does not need loans,” Mr Laban Maloi told the IMF while responding to its announcement that it had cleared new loans for Nairobi.
Kenya’s public debt
More Kenyans went online to protest the additional loans on Facebook and Twitter, with some going as far as starting an online petition to the IMF to cancel the latest Sh257 billion loan to Kenya.
The Nation reported on Monday how Kenya’s public debt has risen sharply by more than Sh1 trillion in the last one year under the cover of fighting Covid-19 pandemic.
This now makes the period between March 2020 and March 2021 Kenya’s worst in terms of borrowing, after the government’s appetite for debt shot up by 69 per cent.
In the eight months between March and November last year, Kenya had increased its stock of public debt by Sh971 billion.
This translates to about Sh121 billion every month, a sharp rise compared to the Sh71 billion the country was borrowing per month on average in the year to March 2020, before coronavirus landed in Nairobi.
When the government factors in the latest loans from the IMF and other development partners, and adds to the other loans taken between November last year to date, Kenya’s mountain of public debt is likely to swell by an additional Sh1.2 trillion in just one year.
This amount is enough to build three Standard Gauge Railways (SGR) between Mombasa and Nairobi that were constructed at an inflated cost of Sh327 billion.
But despite borrowing such huge amounts, the critical areas of health continued to suffer last year as medics downed their tools for more than three months.
Increase the debt ceiling
The 2021 Medium Term Debt Management strategy revealed that the government must increase the debt ceiling beyond Sh9 trillion to get the headroom to borrow the billions the Treasury needs to finance the new financial year that starts in June.
The debt strategy notes that it will be impossible to fund the new budget for the 2021/22 and into the medium term if this limit is not increased.
“To accommodate the fiscal deficits in FY2021/22 and into the medium term, the statutory debt limit has to be expanded,” the document reads in part. It notes that the government’s debt strategy formulation has been on a background of public debt fast approaching the statutory ceiling of Sh9 trillion as set out in the Public Finance Management Act, 2012.
“As a result, the implementation of this strategy may require the revision of the debt ceiling through the amendment of the PFM Act based on future borrowing requirements,” the document notes.
Treasury Cabinet Secretary Ukur Yatani said that debt accumulation is the result of fiscal deficits and when it becomes necessary to increase the ceiling, Treasury will table that request in Parliament.
“If Parliament approves expenditures that will lead to borrowing beyond the Sh9 trillion debt limit, the National Treasury will request Parliament to expand the debt ceiling to accommodate the necessary additional borrowing as required by the PFM Act 2012,” he said.
Mr Yatani has defended the excessive borrowing on shrinking revenues in the wake of the Covid-19 pandemic.
As soon as Covid-19 hit Nairobi last year, Kenya stepped on the borrowing gas pedal hard, reaching out to multilateral lenders in a bid to build its war chest in the fight against the Covid-19 pandemic.
Covid-19 war chest
The World Bank was the first to open its purse strings, extending an immediate Sh6.8 billion support to the Health ministry for preparations and response, as it retreated to consider a bigger loan.
Then its Bretton Wood sibling, the IMF, came in second advancing Nairobi with Sh78.3 billion to deal with the pandemic. At the time, Kenya said it was expecting a major cash shortage due to the containment measures.
After IMF disbursement, the World Bank wired another Sh108 billion to the Central Bank of Kenya (CBK), as both budgetary support and extra resources to help fight the deadly viral infection.
That was not all. The African Development Bank also joined the fundraising effort, sending Nairobi an extra Sh22.5 billion boost as concessional loan. The European Union topped this up with an additional Sh7.5 billion in form of grants.
In just under 60 days, Kenya had already secured Sh223 billion as part of its Covid-19 war chest.
This was before it launched other fundraising efforts from the commercial lenders at both local and international markets. It did not stop there, it also went out, seeking debt relief from the big lenders.
A year, down the line and another lockdown, Kenya appears to be repeating 2020.
On Friday, the IMF again approved a fresh Sh257 billion loan for Kenya through a 38-month programme, at a time Kenya is struggling with repaying its mountain of debt.