Kenya's new finance minister has surprising numbers about public debt, loans, sugar demand and VAT
- The minister is correct that Kenya pays nearly three times more interest on its domestic debt than on foreign debt, yet there's a near-halfway split between foreign and domestic debt. He also nailed the low interest rates on Japanese bilateral loans.
- Available data supports his claim that Kenya has been running a sugar deficit, forcing the country to import the key commodity.
- However, he understated the amount of value-added tax collected as a proportion of gross domestic product (GDP).
Long-time opposition politician John Mbadi was appointed Kenya's new finance minister on 7 August 2024. Before his appointment, Mbadi was a fierce critic of president William Ruto's administration's economic policies.
With his appointment, he is expected to draw up new tax plans to increase government revenue. He has hinted at reintroducing some clauses from a hugely controversial finance bill that was scrapped, costing his predecessor his head.
On 22 August 2024, a fortnight after taking office, the critic-turned-insider was interviewed on Citizen TV, the country's most-watched television station, to explain his plans for the ailing economy.
Mbadi spoke about the distressing public debt that is stifling government spending, the controversial relationship with the International Monetary Fund, and the new tax measures amid public calls for austerity.
The minister made claims about public debt, interest rates on bilateral loans, his plans for the vital sugar industry and value added tax (VAT). We fact-checked his claims against the publicly available data.
External debt is money owed to foreign countries, multilateral institutions, and foreign creditors. Domestic debt is the debt owed to commercial banks, pension funds, businesses and individuals within a country.
Mbadi said half the country's debt was owed to foreign creditors and the other half to the domestic market.
Kenya's national treasury publishes annual reports on the public debt.
The most recent report, dated September 2023, showed that 52.9% of the public debt was external, and 47.1% was internal.
The trend over five years shows an almost even split.
In addition, the treasury also publishes quarterly reports on the state of the economy.
The most recent report, dated August 2024, showed an external debt of 48.8% and a domestic debt of 51.2%.
It is not quite 50-50, but it is "about" right. Mbadi's claim is correct. - Alphonce Shiundu
Mbadi said Kenya was spending three times more on interest to its domestic creditors than to foreign creditors. "I am telling you clearly that our domestic debt is very expensive," he said.
The treasury's August 2024 quarterly report showed that in the financial year 2023/24, ending on 30 June 2024, the country spent KSh218.2 billion on external debt interest and KSh622.5 billion on domestic debt interest.
Mbadi was right that the government spent three times as much servicing domestic debt as it did on foreign debt.
But there are also payments on the principal debt.
In the August 2024 report, a total of KSh756 billion was spent on external debt payments, of which KSh537.8 billion (71.1%) was spent on principal payments and KSh218.2 billion (28.9%) on interest.
Another treasury report on all government expenditure showed that KSh1.6 trillion was spent on public debt for 2023/24.
We know that KSh756 billion or 47.4% of the total debt expenditure was on external debt service, so we can infer that KSh840.6 billion or 52.6% was on domestic debt.
While the interest paid on domestic debt is three times higher than that paid on external debt, the split between total expenditure on the two types of debt nearly matches the debt shares. - Alphonce Shiundu
To ease pressure on public funds, Mbadi said the country needed to reduce "expensive" domestic debt with high interest rates in favour of low-interest multilateral, concessional and bilateral loans with longer maturities.
"The Japanese government gives their loans at about 1%, 1.7%, 1.5% ... so, even though it is bilateral, it is still cheaper," the minister said.
Africa Check asked Prof Hiroaki Shiga of the Graduate School of International Social Sciences at Japan's Yokohama National University for the best source of data to assess this claim.
Shiga referred us to the Japan International Cooperation Agency (JICA), the country's global development agency.
The data shows that Japan offers loans to countries at interest rates of between 0.4% and 2.4%.
A summary is given below.
| Japan's bilateral and multilateral lending rates | ||
| Country category | Interest rate | Examples of countries in this category |
| Low-income least developed country | 0.4% | Afghanistan, Rwanda, Ethiopia, Uganda, South Sudan |
| Low-income country or least-developed country | 0.8% to 1.7% | Benin, Nepal, Senegal, Tanzania |
| Lower middle-income country | 0.75% to 2.2% | Algeria, Cameroon, Ghana, India, Kenya, Morocco, Pakistan, Zimbabwe |
| Upper middle-income country and uppermost middle-income country | 0.95% to 2.4% | Malaysia, Gabon, Mauritius, South Africa, Thailand, Turkey |
Source: JICA, terms and conditions of Japanese ODA loans, effective 1 April 2024
We therefore rate this claim as accurate. -Tess Wandia
Mbadi also said he was from the country's south-western sugar belt and wanted Kenya to be self-sufficient in sugar production. He said Kenya's sugar deficit has been persistent.
Sugar availability and pricing are politically volatile subjects in Kenya, where many state-owned sugar factories struggle to stay afloat. The high production costs make Kenyan sugar exports expensive, putting local sugarcane farmers at the mercy of cheap imports.
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"I am not saying that the (sugar) demand has not been higher than the supply. It has been. We know that, and it has been there; those [are the] statistics," he said.
Dr Timothy Njagi is a development economist and research fellow at the Tegemeo Institute, an agricultural thinktank. He referred us to the Agriculture and Food Authority (AFA).
Every year, the state agency publishes a yearbook of statistics containing detailed information on various crops, with a focus on agricultural production and market performance.
Kenya's statistics bureau also refers to the agriculture authority when reporting sugar production, imports and exports in its annual economic survey.
The authority's 2024 statistical yearbook reported on the value of sugar imports and production from 2017 to 2023. In an email, Njagi also explained that in developing the balance sheet, the demand side includes production plus imports.
| Year | Demand (production + imports) (metric tonnes) | Supply (produced locally) (metric tonnes) |
| 2017 | 376,111 + 989,619 = 1,365,730 | 376,111 |
| 2018 | 491,097 + 284,169 = 775,266 | 491,097 |
| 2019 | 440,935 + 458,631 = 899,566 | 440,935 |
| 2020 | 603,788 + 442,393 = 1,046,181 | 603,788 |
| 2021 | 700,241 + 426,334 = 1,126,575 | 700,241 |
| 2022 | 796,554 + 320,708 = 1,117,262 | 796,554 |
| 2023 | 472,773 + 608,178 = 1,080,951 | 472,773 |
Source: Agriculture and Food Authority, 2024
According to the data, demand for sugar has been significantly higher than supply for the past six years.
Mbadi's claim checks out. - Tess Wandia
