Kenya Shilling continues to weaken against the US dollar

NAIROBI, Kenya - The weak Kenya Shilling against the US dollar is slowly pushing Kenya’s debt service towards a KSH 1 trillion mark. Currently, the Kenya Shilling is trading at KSH 130 against 1 US dollar. This has escalated the service debt by KSH 50 billion.

The National Treasury estimates that the country’s national service debt might hit the KSH 1 trillion mark this financial year and could double to KSH 2.1 trillion in four years.

These estimations further reveal underscore the growing burden on the budget, with National Treasury now saying Kenya’s service debt might hit KSH 9.4 trillion by 2023.

According to the National Treasury annual public debt management report, the public debt is expected to go up from KSH 8.58 trillion by June to KSH 10 trillion within the next two years.

This will also trigger a sharp rise alongside costs to service the domestic and external debts from KSH 945 billion in the year to June 2022 to KSH 1.2 trillion during the current financial year.

National Treasury document states that “The debt service stood at KSH 945.081 billion (49.2 percent of revenue) and is projected to increase to KSH 2,123,476 million in the financial year 2025-2026 (64.9 percent of revenue).”

These document implies that between July and June 2023, Kenya is expected to spend upwards of KSH 3.3 billion daily to service debts on average, up from KSH 2.6 billion during the financial year to June.

The National Treasury also pointed out that the national debt service will grow as more instruments mature, with 11.6 percent of the KSH 4 trillion external debts by June expected 2023 to be due within four years while another 23.6 percent of the external debts will mature between five and 10 years.

“Similarly, debt service as a percentage of GDP is projected to decrease to 7.3 percent in the financial year 2025/26 from 7.4 percent in 2021/22,” the Treasury stated.

Records from the National Treasury indicate that Kenya’s debt burden crossed the KSH 9 trillion mark for the first time in July this year.

This comes as the government kick-started the race to source loans to fund the 2022-2023 budget.

The KSH 3.3 trillion budget has a financing deficit of KSH 863 billion, which the Treasury plans to plug through local borrowing of KSH 582 billion and external debt of KSH 281 billion.

GAROWE ONLINE