You are currently viewing our desktop site, do you want to visit our Mobile web app instead?
Complete our online survey and
get 10% discount on our
Insider Gold annual subscription.
 Registered users can save articles to their personal articles list. Login here or sign up here

World Bank tips Kenya on less debt to sustain growth

Treasury expects public debt to climb 11%.

Kenya should consider slowing its borrowing for President Uhuru Kenyatta’s key legacy projects to pave the way for sustained growth, said the World Bank’s chief economist.

Kenyatta’s “Big Four,” a plan to boost manufacturing, farming, health care and low-cost housing, has put pressure on the treasury to hike spending even as it struggles to grow revenue. The Treasury expects public debt to climb 11% to 6.45 trillion shillings ($64 billion) by the end of June from a year earlier.

“It may be better to slow down, perhaps cut back on borrowing, and financing big projects,” Pinelopi Koujianou Goldberg, the World Bank’s chief economist said in an interview on Wednesday in Nairobi. “Take more of a long-term perspective and make sure that the way these projects are financed is truly sustainable.”

Kenyatta is racing to deliver 500 000 affordable houses, provide equipment in hospitals, open up new farmlands with irrigation and double electricity-production capacity by 2022 when his term ends. While there is a provision for private investors to participate in these projects, the government still has to spend to a great extent as well.

Big four

The government has so far fallen short on plans to cut non-essential spending to free up money to support the projects, and instead announced in October a new debt ceiling that effectively increased room for additional borrowing.

Still, Treasury Secretary Ukur Yatani sees a smaller budget gap of 4.9% of gross domestic product in the year starting in July compared with an estimated 6.3% this fiscal year under a new plan that envisions more tax collections.

Goldberg’s comments came after the East African nation’s central bank Governor Patrick Njoroge said Kenya doesn’t have much room to increase debt, currently at 62% of GDP, and should consider partnerships with the private sector to fund government spending.

In November, the International Monetary Fund’s Managing Director Kristalina Georgieva said Kenya should be cautious in piling on debt after it amended its borrowing ceiling to match the size of the economy.

Funding the “Big Four” projects within five years of an electoral term may put pressure on government borrowing and ultimately impede growth, Goldberg said. “If we have fast growth in the short run at the expense of long run stability and long run prosperity, this is not worth it.”

© 2020 Bloomberg L.P.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.


You must be signed in to comment.






Follow us:

Search Articles:Advanced Search
Click a Company: