Kenya's public debt increased by Sh212.82 billion in May from the previous month, owing to the loans extended to the government by multilateral lenders to cushion the country against shocks from the global coronavirus pandemic.
Central Bank of Kenya data show total government debt stood at Sh6.649 trillion as at end of May, composed of Sh3.496 trillion external debt and Sh3.153 trillion in domestic borrowing.
In April, the debt was recorded at Sh6.436 trillion, with the rise in May largely on the external loans, where there was an increase of Sh179.1 billion. Domestic debt during the month went up by Sh33.7 billion.
"The increase in public debt in May was due to the inflows from international financial institutions (IMF, World Bank, Africa Development Bank) which plugged the deficit of the initial pre-empted Sh200 billion from commercial loans," said Genghis Capital head of research, Churchill Ogutu.
"The switch to the multilateral lenders was exacerbated by Covid-19 risk on the potential financing sources on concessional terms and doesn't wipe out the fact that elevated borrowing was on the table in the budget."
In May, the World Bank gave Kenya a Sh107 billion ($1 billion) loan to fill the gap in the budget after the global crisis hit consumers and business leading to decline in revenue collections.
Of the total amount, $750 million was from the International Development Association, to be repaid over a 30-year period, after a grace period of five years, at 1.35 percent interest.
The second component of $250 million, which came from the International Bank for Reconstruction and Development with an interest rate of about two percent.
Kenya also received a Sh78.4 billion ($739 million) loan from the International Monetary Fund (IMF) during the period, at zero-interest rate. The loan will have a grace period of five and a half years, and a final maturity of 10 years.
The public debt is expected to close at Sh6.7 trillion for the year ending June 2020, with a net public debt increase of Sh800 billion over the fiscal year.
Kenya's public debt, which has raised sustainability questions recently, currently stands at around 65 percent of GDP.
Following the country's elevation to a lower middle income economy following the rebasing of the economy in 2014, the Treasury found it harder to come by concessional debt and was forced to take up commercial debt such as Eurobonds to plug the foreign financing component of the budget deficit.
Kenya has also borrowed more than Sh450 billion from China to finance the construction of the standard gauge railway.