The Institute of Economic Affairs says the government should consider seeking a debt repayment extension from China which Kenya owes about 634 billion shillings.
Institute of Economic Affairs CEO Kwame Owino says in the current financial year, Kenya is expected to spend 870 billion shillings on servicing debt.
Owino is proposing that the government borrows more locally to directly benefit more Kenyans.
A government delegation is in China to among others reach a deal on 368 billion shillings financing for extension of the Standard Gauge Railway from Naivasha to Kisumu.
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The Institute of Economic Affairs is proposing that it is about time Kenya changed tact and cut down on application of commercial loans such as Eurobonds, syndicated loans and financing from China as these loans are found to have high interest rates thus are riskier.
The institute also proposes that the government borrows internally through treasury bonds and treasury bills as these will directly benefit Kenyan investors.
According to Institute of Economic Affairs, as at September 2018, public debt stood at 5.15 trillion shillings comprising 2.54 trillion shillings in domestic debt and 2.61 trillion shillings in external debt.