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Kenya races closer to the red line as debt hits Sh8.4 trillion
Nov 27, 2020
Kenya’s public debt has touched a high of Sh8.4 trillion and is quickly racing towards the Sh9 trillion ceiling as the government chalks up more borrowing in its fight against Covid-19.
This is slightly over three-quarters of the country’s total economic output, technically known as gross domestic products (GDP).
Such a ratio tells a sad story of how Kenya is teetering on the precipice of a financial collapse and it might soon experience difficulties in servicing its loans.
In a report titled Post Covid-19 Economic Recovery Strategy 2020-22, the National Treasury noted that as at August 2020, the stock of public debt stood at Sh7.06 trillion, 69.2 per cent of GDP.
“This together with committed undisbursed debt of Sh1.35 trillion translates to a stock of public debt of Sh8.41 trillion against a ceiling of Sh9 trillion, which implies limited space for additional borrowing,” Treasury said in the paper that was released this month.
Assuming a projected GDP of Sh11 trillion, the additional loans push the debt-to-GDP ratio to 76 per cent, which is close to, or over, the 70 per cent threshold for low middle-income countries such as Kenya when adjusted for prevailing mitigating terms such as interest.
Should creditors demand to be paid all their debts, this would see the output for 43 counties wiped out, leaving Kenya’s economy shrinking into the size of Nairobi, Nakuru, Kiambu and Kisumu combined.
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