21 November 2017

Kenya: IMF Cautions Over Debt Vulnerability

Photo: Business Daily.
Counting foreign currency.

The International Monetary Fund (IMF) has cautioned that Kenya's rising debt levels need to be contained to cushion the economy from unplanned shocks.

The international lender's Kenyan representative Jan Mikkelsen said while the economy had proved to be resilient to drought and a prolonged electioneering period this year, the rising public debt was a concern and needed to be checked to avoid any shocks to the economy in the future.

Kenya's public debt has been on an upward trend in recent years, rising to Sh4.4 trillion by the end of September from less than a trillion shilling in mid-2014.

Mikkelsen said the country required clear policies to address the "debt vulnerability", which could rise further if Treasury goes for another syndicated loan and a second Eurobond as indicated by Finance Cabinet Secretary Henry Rotich two weeks ago.

"The fiscal deficit needs to be reduced a little bit to make more room for the private sector and also to reduce the public debt pressure," he told Business Daily on the sideline of an event hosted at Strathmore Business School.

Political stability

"We still do see growth in the Kenyan economy quite resilient. It will of course assume that political stability returns to the country."

A Budget Review and Outlook Paper (BROP) released in September showed that the level of public debt to GDP ratio was expected to rise to 59.0 per cent this fiscal year, from a previous target of 51.8 per cent.

The fiscal deficit was seen at 7.9 per cent from a previous forecast of 6.2 per cent.

The representative said an IMF mission will be visiting Nairobi in mid-December to review its programmes with the government.

The IMF has stand-by arrangement and a standby credit facility worth a total $1.5 billion that the Kenyan government can withdraw from in case of any significant external shocks.

Mikkelsen said the government had not made any request to withdraw from these facilities so far this year. The programme ends in March 2018.

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