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New GDP data gives State room to borrow more : The Standard



Workers at the phase two of the on-going standard Gauge Railway project at Nachu, area Kiambu County. [Peterson Githaiga/Standard]

The statistics body has revised up the size of the economy in 2017 by almost half a trillion.

In what is likely to offer a reprieve to Treasury, the adjustment makes room for the Government to borrow more, given that the current debt to Gross Domestic Product (GDP) ratio borders close to the danger zone.
GDP – the sum of goods and services produced in the economy last year, was revised upwards by Sh447 billion to stand at Sh8.2 trillion, up from the earlier estimate of Sh7.7 trillion.
Kenya’s debt at Sh5.1 trillion to GDP in nominal terms now drops by two percentage points to 62 per cent from the initial 64 per cent. Debt-to-GDP is a key indicator of debt sustainability.

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Treasury puts the country’s debt-to-GDP ratio in 2017 at 49 per cent, a ratio it insists is stable as it is below the recommended threshold of 74 per cent of GDP in net present terms.
With this development, the Kenya National Bureau of Statistics (KNBS) has now revised GDP upwards for three consecutive years, bringing into question how the data is compiled. 
Insisting that revision of the data was normal, the national statistician said changes to the national accounts is made as new updates become available.
Also, a review is done when new methods, definitions, techniques, systems, guidelines, and classifications are implemented. “Revision of statistics is a standard practice recognised internationally as a critical part of a sound statistical production process,” said KNBS in a statistical release.
KNBS said that the decision to review the nominal GDP came after they interrogated the national accounts data. Much of the change was occasioned by changes in the compilation of data on prices of “particular food crops.”

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“The current revision was mainly informed by notable changes in the data that was used in the compilation especially those to do with prices of particular food crops that considerably led to an underestimation of the output of growing of crops,” said KNBS.
KNBS said the revision mainly affected data for 2017 and was more pronounced in the GDP at current prices, as opposed to the volume of goods and services produced during the period.
After experts, including Central Bank Governor Patrick Njoroge and the International Monetary Fund warning Government of having reached the borrowing limit, Treasury has been looking for ways to chalk up more debt as budget deficit continue to widen.
Early this year, Treasury sought Parliament’s nod to reducing the Government’s debt by half.
The initiative does not involve paying off the debt but changing the law to create room for the State to borrow more. Treasury wanted a change to the Public Finance Management Act to lower Kenya’s percentage of debt to GDP from 49 per cent to 25 per cent.

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This would effectively offer the Government more room for borrowing. “We are asking for an amendment of the PFM Act to classify only external public guarantee debt to be considered as the ceiling for the purposes of the World Bank Country Policy and Institutional Assessment,” Treasury PS Kamau Thugge said.
Dr Thugge said Kenya’s current total debt to GDP stands at 49 per cent, which is still short of the World Bank’s recommendation of 74 per cent, the level at which it considers debt to be risky.

Kenya’s Economy sizeGross Domestic ProductGDPKenya National Bureau of Statistics

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