Kenya’s borrowing remains manageable, Treasury Cabinet Secretary Henry Rotich (pictured) said, looking to quash concerns after the International Monetary Fund (IMF) raised its assessment of the risk of debt distress to moderate.
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The country’s nominal debt-to-gross domestic product is still sustainable at 55 per cent, far lower than the IMF’s upper threshold of 74 per cent, while the net value of the debt is less than half of GDP, CS Rotich told a conference Sunday in Nairobi.
The IMF analysis shows Kenya’s debt is sustainable, although the risk of distress “has moved from low to moderate” in exceptional circumstances, Rotich said.
“But this is based on extreme shocks, like if growth falls to almost zero, if the country faces high interest rates or a sharp depreciation of the currency.” “These are the conditions under which the debt can move to moderate risk,” he said. “But Kenya is not a high-risk country.”
Focus on Kenyan debt has intensified since it more than doubled in the past six years to Sh5.15 trillion. The IMF announced its risk revision in October and warned the borrowing is raising fiscal vulnerabilities and increasing interest payments.
Rotich attributed recent rises in debt to infrastructure spending and said the government is addressing the issue, targeting a fiscal deficit of three per cent by 2022. The deficit peaked at 8.9 per cent in the 2016-17 financial year.
“We have continuously implemented fiscal consolidation and plan to access private sector resources through public private partnerships to fund infrastructure development going forward,” he said.
The IMF also judged the shilling at least 17.5 per cent overvalued and no longer floating – an assessment disputed by the Central Bank. Mr Rotich said stability in the currency is helping keep debt at sustainable levels.
”Our market is flexible; if you want foreign currency you go to the market and get it,” he said in a separate interview. “No one is managing the currency, so as is typical in a free market, there can be no over-valuation or undervaluation
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