Kenya's public debt swells to 55 percent of GDP
04 November 2013, 09:12
Nairobi - Kenya's public debt has surged to 55 percent of the nation's gross domestic product (GDP), according to a debt bulletin from National Treasury.
The debt stood at 52 percent of the nation's GDP at the end of June. The 3 percent swell, according to Treasury, follows rise in domestic and external loans.
The nation's public debt as at June stood at 22 billion dollars. And in June 2012, public debt stood at 19 billion dollars, which was 49 percent of GDP.
"As at end of August, public and publicly guaranteed debt stood at 24 billion U.S. dollars or 54.7 percent of GDP," says the debt bulletin received Saturday.
"The increase of 2.6 percent over the end of June position is mainly attributed to a rise in both domestic and external debt."
External debt surged by 145 million dollars between June and August as compared to a rise of 130 million dollars between April to June period.
According to Kenya National Bureau of Statistics, the nation's GDP stands at about 34 billion dollars.
"Overall, public and publicly guaranteed external debt increased by 145 million dollars as at end August to 10.4 billion dollars from 10.3 million at end of June," says the bulletin, which shows 56 percent of the public debt is domestic while 45 percent is external.
Treasury attributes the increase in external debt to rise in disbursements and fluctuations of the local unit against world major currencies.
"The increase is due to rise in disbursements and depreciation of the Kenya Shilling against the major currencies. The currency composition of external debt is that Euro forms the largest share of the external debt portfolio at 34 percent followed by the dollar at 32 percent," says Treasury.
The Kenya shilling is currently exchanging at an average of 85 against the U.S. dollar, 136 against Sterling Pound and 116 against the Euro. The shilling has strengthened from an average of 87 against the dollar in August.Japanese Yen's debt portfolio stands at 15.1 percent, Sterling Pound 5.4 percent and Yuan 5.7 percent.
"Official creditors account for 91.4 percent of the total public and publicly guaranteed external debt, out of which debts owed to multilateral creditors amounts to 6.6 billion dollars. Bilateral debt stands at 3.2 billion dollars (31 percent of the total)," says the bulletin.
In the multilateral category, IDA, African Development Bank and International Monetary Fund account for the biggest proportion of external credit, while China, Japan, France and Germany are the leading creditors in the bilateral category.
A majority of the external loans are used to fund energy, infrastructure and information and technology sectors at 37 percent, followed by general labor and economic affairs at 20 percent and public administration at 14 percent.
The report shows Kenya had projected to service external debt as at end of August to the tune of 62.9 million dollars.
"Principal and interest projections for August were 19.3 million dollars and 3.8 million dollars, respectively. Multilateral and bilateral creditors constitute 55 percent and 46 percent of the cumulative projected debt service respectively during the period under review," says Treasury.
On the other hand, gross domestic debt increased by 448 million dollars to stand at 13.1 billion dollars as at the end of August.
"The composition of domestic debt as at end August was 69.3 percent of government domestic debt was in Treasury Bonds, 24.9 percent in Treasury bills while the balance was government overdraft at the Central Bank of Kenya," says the debt bulletin.
However, as at the end of October, the domestic debt stood at 13.5 billion dollars after an increase of 1.2 billion from 12.4 billion dollars, according to Central Bank of Kenya weekly bulletin dated Nov. 1.
This followed 493 million dollars, 479 million dollars and 194 million dollars respective increases in the stocks of Treasury bills, Treasury bonds and government overdraft at the Central Bank, and a 4.7 million dollars decline in other domestic debt.
The structure of the debt, according to Treasury, is consistent with the debt strategy of holding more domestic debt on longer dated instruments to minimize refinancing risk and promote development of domestic markets for government securities.
The large size of domestic debt has made Kenya pay high interest payments on the loans. In the week ending Oct. 25, interest payments stood at 343 million dollars.
The cost during the period was on account of interest and other charges on Treasury bills, Treasury bonds and government overdraft.