President Uhuru Kenyatta has defended Kenya’s debt, saying the money was used to finance infrastructure to stimulate growth.
The President told a joint session of both Houses of Parliament that Kenya was not at any risk of default.
He said the proportion of debt to gross domestic product (GDP) was still safe enough for the country to honour its obligations without defaulting.
“Every year since the start of my administration, we have made adequate budgetary provisions to service the debt. I want to assure Kenyans that at no point has the country been at risk of default,” said Mr Kenyatta.
He said the debt from the domestic and international creditors had been solely to finance transport infrastructure, increase energy production and access to electricity as well as improve security to sell Kenya as a preferred investment destination.
Last year, the World Bank called for caution in borrowing, as Kenya’s public debt had outstripped growth in revenue collection.
The debt ratio has grown from 42.1 per cent of GDP in 2012/13 to 55.1 per cent of GDP in 2015/16.
Mr Kenyatta assured Kenyans that the use of the borrowed billions to improve the investment environment would in turn lead to job creation and poverty reduction. “I assure every Kenyan that all the funds borrowed will continue to be put to good use,” said the President.
He likened the infrastructure projects to a sowed seed whose harvest will be faster economic growth that will turn Kenya into a manufacturing powerhouse. Treasury Cabinet Secretary Henry Rotich, in an earlier interview, told the Nation that the country was far from a debt distress.
He said the debt (mainly concessional, that is, it has a low interest rate and very long repayment terms regime) and the fact that it is used to fund infrastructure gave it very good prospects of boosting economic growth in the medium- to long-term.
“Kenya’s debt level should be a concern only when it surpasses 74 per cent of GDP,” Mr Rotich wrote back in response to inquiries.
The country would, however, require a steady economic growth to shrug the debt distress concerns. GDP growth for 2017, which was projected at six per cent, faces a slowdown due to the General Election, drought and high inflation.
Among the key projects believed to bring economic gains is the standard gauge railway, which will be a big boost for transport efficiency in moving mass cargo and promotion of regional trade.