Kenya: Government debt grows, while economy falters

by Magdalene Mukami

NAIROBI, Kenya

As Kenyan government debt grows, and the economy falters, experts are concerned about the country's ability to repay its creditors.

Nairobi (AA) – Kenya’s sovereign debt is growing, but the economy is faltering, and experts are concerned about the country’s ability to pay its debts.

On Friday, after a meeting between Kenyan President Uhuru Kenyatta and his counterpart from China Xi Jinping in South Africa, Kenyatta secured a $1.5 billion loan from China for the extension of the Standard Gauge Railway – a new state-of-the- art railway set to phase out the colonial-period rail system from Nairobi to Naivasha.

This comes a month after the Kenyan government through the Treasury signed a $597 million syndicated loan with international financiers to fund infrastructure projects.

Data from the International Monetary Fund (IMF) shows that, by the end of November, Kenya had a public debt of $28.4 billion, a 20 percent increase from the $22.5 billion debt in the same period last year.

Opposition leader Raila Odinga warned that the debt is not sustainable.

“We are on the road to nowhere, the road that the Jubilee government is over- borrowing and overspending, inflation has gone haywire, our exports have stagnated but imports are growing. The government is living beyond its means,” Odinga said.

Kariithi Murimi, an economist from the Kenyan capital, told Anadolu Agency on Monday that the country is on a borrowing spree which might sink the East African country.

“The Kenyan government has borrowed aggressively, and this has caused interest rates to go up; this is not the time that Kenya should be seeking foreign financing for development projects,” Murimi said.

“The economy is not that stable and the shilling has weakened against the dollar, which means that paying the debt that Kenya has will be a challenge especially for the taxpayer,” he added.

The economist said that tourism earnings, which bring in the lion’s share of foreign currency revenue, have fallen off drastically. This will affect the rate at which Kenya pays its debt as it has a direct correlation with reduced foreign exchange holdings that are expected to yield enough revenue to repay the debts.

“The government needs to take a step back, as the debt to GDP ratio is closely approaching 60 percent, Murimi said. “This is not good news for the Kenyan economy.”