Sh6.2trillion public debt sustainable, says CS Yattani
National Treasury Cabinet Secretary Ukur Yatani now says the country’s public debt remains sustainable.
Kenya’s current level is estimated at Sh6.2 trillion, which is 58 per cent of the Gross Domestic Product (GDP).
The Minister said the country’s public debt remains below International Monetary Fund (IMF) and World Bank debt sustainability assessment (DSA) threshold of 74 per cent of GDP.
Appearing before the Senate ad hoc committee on Covid-19 pandemic via Zoom, Yatani told senators that Kenya continues to meet its debt obligations as they fall due and has not at any time defaulted on its debt obligations.
“Prior to the coronavirus pandemic, the Government had already introduced measures to contain public debt at sustainable levels,” he said.
The actions include: Taking decisive actions to curtail spending through austerity measures in order to reduce the size of the fiscal deficit.
“In this regard, the government has been pursuing a fiscal consolidation plan which aims at lower fiscal deficit from a high of 8.9 per cent in 2016/17 financial year to 3.5 per cent by 2022/23 financial year,” Yatani told the committee chaired by Nairobi Senator Johnson Sakaja.
The committee had invited him to shed light on the government plans in regards to the payment of public debt owing to the expected shortfalls in revenue collections in 2019/20 and beyond.
Yatani said Treasury is plans to reduce, to the extent possible, commercial borrowing by gradually shifting to concessional loans.
This will be by implementing domestic debt reforms to lower cost and risk of domestic borrowing by shifting away from Treasury bills to Treasury bonds.
In addition to, re-allocating non-disbursing external loans (dormant loans) to priority projects.
“The coronavirus pandemic may delay the realisation of our objectives but the measures we have already commenced implementing will make it easier for us to go through this crisis,” the CS said.
Other measures include to stagger contracting of the current external loans over the two (2) financial years in 2019/20 and 2020/21 financial years.
Re-finance of high-cost external debt, estimated at $3b, including negotiating with key creditors (Exim-Bank of China) to restructure on bi-lateral basis specific debts are other measures.
Treasury will also negotiate on bi-lateral basis swapping of debt service for grants financing key development projects—Agenda 4 and Climate Change.