Businesses & Financial News

A snapshot of Kenya’s debt profile

According to Treasury estimates, public debt stock is expected to hit Ksh. 8.6 trillion at the close of June 2022 before rising further to KSh9. 5 trillion next June.

By Isaac Oganga

Here is what you need to know concerning Kenya’s debt situation

In December 2014, Kenya added $250 million to the five-year tranche at a 5.0 percent yield and $500 million to the 10-year tranche at 5.9 percent. In June 2019, the $750 million five-year tranche matured. $1 billion bond at 8.25 percent.

Stock of external debt of Kenya from July 2020 to December 2021 as of December 2021, the external debt from Kenya accumulated to roughly 4.2 trillion Kenyan shillings (Ksh), approximately 35.7 billion U.S. dollars. The value was equivalent to 51 percent of the country’s total debt, according to STATISTA.

Kenya Government debt accounted for 67.4 % of the country’s Nominal GDP in Mar 2022, compared with the ratio of 67.8 % in the previous quarter.

Kenya government debt to GDP ratio data is updated quarterly, available from Dec 2009 to Mar 2022.

The data reached an all-time high of 68.0 % in Dec 2020 and a record low of 39.7 % in Mar 2010.

CEIC calculates quarterly Government Debt as % of Nominal GDP from monthly Government Debt and rolling sum of quarterly Nominal GDP. The Central Bank of Kenya provides Government Debt in local currency. The Kenya National Bureau of Statistics provides Nominal GDP in local currency. Government Debt covers Central Government only.

Inflation figures

In July, Fitch Solutions downgraded its growth forecast for Kenya to 4.72 percent from 5.0 percent, citing sharply higher energy prices and inflationary pressures.

The extent of the downgrade revision in growth for the country, reflects similar forecasts for several major African markets, including South Africa, Nigeria, and Ethiopia, as well as Cote d’Ivoire and Cameroon whose economic projections have also been devalued.

The latest revision by the rating agency is lower than the 4.95 percent consensus estimates offered by Bloomberg.

The two firms had in March projected that Kenya’s economy would grow by 5.0 percent, only to revise that figure on inflationary pressures and higher food and fuel prices activated by the Russian invasion of Ukraine.

The country’s economy registered a remarkable 7.5 percent last year, according to Economic Survey 2022 data by the Kenya National Bureau of Statistics (KNBS) and was expected to stabilize at a growth rate of 6.0 percent this year.

But other local uncertainties like the anticipated August 9 general elections have had a negative effect on those growth prognoses.

Indeed, the parliamentary budget office (PBO) on Monday revised Kenya’s economic growth this year from 6 per cent to 4.9 per cent on similar concerns.

In its revenue estimates and expenditure for the 2022/2023 financial year and the medium-term expenditure, the budget office warned of a weaker economic performance in the remaining months of 2022.

“Taking all these factors into account, it is projected that the economy will grow by 4.9 per cent in 2022,” the PBO report noted in part, and also citing erratic weather conditions as another conceivable cause for alarm whose bearing has heavily impacted sectors like agriculture and general food stock.

The country is currently experiencing a fourth consecutive sporadic rainy season aggravated by drought conditions and food insecurity across the country, with an estimated 3.1 million people in pastoral and marginal agricultural areas affected.

The Russia-Ukraine war and the economic sanctions on Russia have led to high energy prices, supply-chain disruptions, raw material shortages and record inflation rates.

The rate of overall input cost inflation in Kenya quickened for the fourth consecutive month in April, according to S&P Global Kenya Purchasing Managers’ Index (PMI) by Stanbic Bank, which showed that such a rise was the highest seen for more than eight years.

Consumer inflation jumped to a six-month high of 6.5 percent during the period, up from 5.6 percent in March.

Meanwhile, the resultant deterioration of growth momentum led Fitch to also cut its forecast real GDP growth for Sub Saharan Africa (SSA) to 3.0 percent in 2022, down from a 3.8 percent projection at the beginning of the year, and below the pre-pandemic 10-year average.

“The Russia-Ukraine conflict will weigh on business sentiment. Our Oil & Gas team expects domestic oil production to increase by 3.5 percent in 2022 up from a 4.9 percent decline in 2021 as oil producers take advantage of higher prices, noted the Sub-Saharan African Macro monthly outlook by Fitch Solutions released last Friday.

Kenyan firms displayed greater concern that growth will be dampened by rising prices and living costs in the months ahead owing to the factors listed above.

“The next three months will be tight for business owners but this could change after the elections which has triggered another level of uneasiness and indecision by corporates,” noted Peter Macharia, an economist.

The economy has been reeling from the effects of Covid-19, Russia-Ukraine war and wanton looting of public resources for several months, factors that have affected incomes and jobs, with an April 2021 Bretton Woods institution estimating that Kenya’s GDP contracted by 1 per cent last year due to Covid-19 alone.

Up until July last when the government lifted all movement restrictions, for most part of 2020, the economy was exposed through the dampening effects on domestic activity of the containment measures and behavioral responses.

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