Kenya’s new budget to cater for debt

Kenya could spend up to 1.2 trillion Kenyan shillings on debt servicing in the new financial year, raising concerns about the country's ability to pay off its debts. Treasury cabinet secretary Ukuri Yatani painted a conservative picture of the country's debt financing, leading many to question how Kenya will manage such a large debt burden. Churchill Ogutu, Head of Research at Genghis Capital, shared insights on the challenges the country faces in servicing its debt. With 66 percent of ordinary revenue already allocated to debt servicing, there are worries that critical spending on recurrent and development expenditures will be impeded. The lack of clarity on how the debt will be funded adds to the uncertainty surrounding the country's financial future. The International Monetary Fund has cautioned Kenya on its high debt levels, moving the debt distress rating from moderate to high. This has prompted discussions on how to make Kenya more investor-ready and improve its debt outlook. Both the IMF and the World Bank have extended loans to Kenya recently, highlighting the elevated risk distress the country is facing. The increased borrowing, both externally and domestically, has led to ballooning debt servicing costs. In the next financial year, over 65 percent of public debt servicing costs will go towards domestic debt. This sheds light on the significant impact of domestic borrowing on Kenya's overall debt burden. President Uhuru Kenyatta's legacy has been marred by the exponential increase in public debt during his tenure. Starting at $11 billion, the public debt has surged to $73 billion under his leadership, with expectations of further increases. While the debt has largely been attributed to capital expenditure for infrastructure projects, concerns remain about the returns on these investments. Despite the focus on infrastructure spending, there are doubts about the projects' ability to generate sufficient returns to repay the debts. The IMF and World Bank have urged Kenya to implement debt reforms and tighten procurement processes to ensure more accurate budget estimates. Monitoring and evaluation of projects are also essential to prevent cost overruns and reduce debt accumulation. The government's commitment to enacting a robust public procurement act is a step in the right direction to address these issues. While there are policies in place to contain spending and reduce debt accumulation, a more proactive approach is needed to safeguard Kenya's financial future. In a tragic turn of events, news of billionaire investor Chris Kirubi's passing shook the nation. A prominent figure in Kenya's business landscape, Kirubi was known for his entrepreneurial acumen and leadership in various industries. His role in Centum Investments and other enterprises left a lasting impact on Kenya's economy and entrepreneurial ecosystem. Kirubi's legacy as a mentor and leader will be sorely missed, leaving a void in the business community and depriving aspiring entrepreneurs of a valuable guide. As Kenya grapples with mounting debt challenges, the loss of Chris Kirubi serves as a reminder of the need for prudent financial management and sustainable economic practices to secure the country's fiscal health.