‘We’re doomed!’ Uhuru and CBK Boss clash over debt crisis

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Even as the Kenyan government took its begging bowl to the World Bank for a new loan of Sh75 billion, it has now emerged that the country has hit the debt ceiling and it can’t sustain new borrowing to run its programmes or service new loans.

This was revealed by Central Bank of Kenya Governor Patrick Njoroge who on Tuesday warned that the country was sinking into deeper debt, adding the only way out to address maturing loans is to seek restructuring of short-term loans to increase their maturity in a bid to ease pressure on repayments.

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Currently, the country’s debt portfolio stands at Sh5.5 trillion, which represents a debt service revenue ratio of 33.4 per cent instead of the recommended global average of 30 per cent.

“It is important to say that the moment for dealing with debt reorganisation, looking at debt and itself re-organising it,” Njoroge said.

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But as if unperturbed with the reality, the government is reported to be in talks with the World Bank for an urgent loan worth $750 million (Sh75 billion) to support its 2019/20 budget particularly the Big Four agenda projects.

National Treasury Cabinet Secretary Henry Rotich in a letter to the Washington-based lender said the loan will top up the 2019/2020 budget on the government’s Big Four Agenda that includes universal healthcare, affordable housing, food security, and manufacturing.

However, reports indicate that some countries have opposed Kenya’s bid for the new loan citing weak financial public management systems.

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According to reports, the World Bank is yet to approve the loan.

This comes just three weeks after government officials went to the US and Europe conducting roadshows to promote the planned 250 billion shillings Eurobond.

Kenya is expected to float 12 and 31-year Eurobonds that would be listed on the Irish and London stock exchanges.

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Kenya returned for a 10-year and 30-year dual-tranche bond in early 2018 before starting talks with lenders at the beginning of this year on the issuance of a further 2.5 billion dollar worth of bonds.

According to the National Treasury, some of the funds raised from the new Eurobond issue will be used to refinance a maturing 5-year dollar denominated bond that was issued in June 2014.

Njoroge, whose first term is due to end next month, said the national debt stood at 55 per cent of gross domestic product – the rate at which the economy is producing goods and services –in September last year and that of the $2.1 billion (Sh219 billion) Eurobond issued in May was to enable Kenya refinance existing loans and get more room for the economy to expand and spur the country’s export capacity.

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“The new borrowing needs to allow for refinancing of the debt,” he said.

“We will be repaying a portion of the money amounting to Sh750 million by June 24.”

Analysts have continuously warned Treasury Mandarins that rapid accumulation of public debt in the past six years will put Kenya’s economy at risk having crossed the Sh5 trillion mark for the first time in June last year.

Kenya tapped the Eurobond market in 2014 raising $2.75 million (Sh275 billion) , then raised $2 billion (Sh210 billion) in another sovereign issue that closed in February 2018.

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The reality is that we as wananchi are now bearing the biggest burden of the government’s incompetence.

The taxpayer has borne the increasing cost of paying servicing debts as interest payment shot up by 31 per cent to Sh400 billion ($4 billion) in the current financial year from Sh305 billion ($3.05 billion) in the revised budget of 2017/18.

And now amid falling revenues and worsening debt service obligations is a pointer to the country’s deteriorating cash-flow situation amid growing appetite for spending and embezzlement of funds.

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