Ruto backtracks on ballooning national debt pledges, borrows Sh500billion in three months

President William Ruto’s Kenya Kwanza administration has backtracked on key election pledge on which they rode to power to cut down on foreign borrowing but has so far gobbled up to Sh500billion in three months only in power which translates to almost double quarterly borrowing of his predecessor retired president Uhuru Kenyatta.

In what appears to be a high projection appetite for foreign loans amid growing national public debt, rising inflation levels and weakening of the Kenyan shilling against the dollar, president Ruto has borrowed more than Sh500 billion in three months since assuming office, a report by the Central Bank of Kenya (CBK) shows.

The borrowed money was channeled towards budget deficit financing translating to to an average of Sh5.57billion in new debt per day, between September 1 and November 30, 2022.

According to the report, in the months of September, October and November alone, the government borrowed a total of Sh506.9billion almost double the quarterly bowing recorded by the Jubilee administration.

A monthly economic review report by the CBK for November shows that in September, the government borrowed Sh132.69billion, constituting Sh101.57billion in domestic deficit financing and Sh31.12 billion in foreign deficit financing.

And in October, the government sourced Sh110.2billion and Sh44.32 billion from domestic and foreign financiers to plug budget deficits, totalling Sh154.5billion.

Government borrowing rose to 42 per cent in November to hit Sh219.75billion compared to the previous month, adding up the total debt taken over the three months from September to Sh506.98billion.

The borrowing in November was the highest amount tapped in a single month since president Ruto’s regime took office and translated to an average Sh7.3billion in loans per day.

“It includes public and publicly-guaranteed foreign currency loan inflows,” the report says on the government’s foreign borrowing.

The CBK report shows that President Ruto’s government borrowed heavily from the domestic market, with Sh392.5 billion (77.4 per cent) of the amount borrowed domestically. Foreign deficit financing totalled Sh114.47 billion (22.6 per cent) of the total money borrowed through the three months.

It also says that the figures on the government’s domestic deficit financing are ‘net of Central government deposits at the Central Bank’.

“Deficit financing comprises external borrowing, domestic borrowing, and sales of government shares in government agencies (privatisation),” the report says.

The government did not privatise any of its agencies during the period, with the privatisation Bill having just been released this past week for public participation.

The report shows that Kenya’s public debt hit Sh8.89 trillion by November 2022 from Sh8.117 trillion in November 2021, a Sh781 billion increase.

Before being elected into office, Ruto was critical of his boss over national debt and foreign borrowing saying once he ascends to power, his administration will cut off any further external financing in form of debt.

And in a sharp contradiction, since assuming office, president Ruto has openly spoken against growing the public debt, indicating his objective was to grow government revenues and cut non-essential spending as a way to reduce budget deficits and slow down on borrowing.

“We must stabilise our public finances. This year, we will spend 60 per cent of our revenues to service our debt. We are faced with Sh600 billion in pending bills for goods and services supplied to the government. Clearly, we are living beyond our means. This situation must be corrected,” the President said after his inauguration in September.

He later ordered a Sh300 billion cut on government expenditures in the 2022/23 budget, while he gave Kenya Revenue Authority targets to raise Sh3 trillion in revenues during the next financial year, up from the Sh2 trillion the authority collected in 2021/22.