President Uhuru Kenyatta will accumulate nearly Sh2.13 trillion more in public debt by the time his final term ends in August 2022, Treasury projections show, signaling increased pressure on taxpayers’ funds.
Treasury chiefs project in draft Budget Review and Outlook Paper that total debt will jump to nearly Sh7.17 trillion in the year ending June 2022, from nearly Sh5.04 trillion this June.
If that comes to pass, Mr Kenyatta will have contracted at least Sh5.27 trillion debt to implement his manifesto in 10 years in power after he inherited slightly more than Sh1.89 trillion in June 2013.
The Jubilee administration has ramped up spending since 2013 to build much-needed new roads, a modern railway, bridges and electricity plants, driving up borrowing to plug the budget deficit.
The increased debt has seen Kenya commit more than half of taxes to paying loans, leaving little cash for building roads, affordable housing and revamping of the ailing health sector.
Public debt stood at Sh5.04 trillion in June 2018, up from Sh4.41 trillion in June 2017, Sh3.62 trillion in June 2016, Sh2.83 trillion in June 2015, Sh2.37 trillion in June 2014 and Sh1.89 trillion in June 2013.
Mr Jibran Qureishi, the regional economist for Stanbic Bank, said growth in public debt has partly been driven by over-budgeting leading to ambitious tax targets, which have largely been missed.
The ambitious tax targets, he added, have increased the government’s appetite to continue spending without corresponding impact on economic growth.
“When you do that (have ambitious revenue targets) from the beginning, you feel like you have enough room for maneuver when it comes to expenditure, but reality is you are not going to achieve that tax number,” Mr Qureishi said.
The growth in Kenya’s debt has raised concerns the ballooning repayment costs are hurting economic activities by taking up a large chunk of government revenue.
Treasury secretary Henry Rotich plans to spend Sh870.5 billion on debt repayments this year ending June next year from a Sh435.7 billion for the year ended June 2018 against expected taxes of Sh1.76 trillion.
Kenya’s access to cheaper international loans from multilateral lenders has reduced after the economy upgraded to lower middle-income economy in September 2014. This has seen the country resort to expensive short-term loans from international lenders.
For the period to June 2018, foreign commercial banks accounted for 37.85 per cent (Sh968.9 billion) of the Sh2.56 trillion external debt.
“The emerging concern is that the government’s appetite for borrowing seems unlikely to wane any time soon and this could eventually push debt towards unsustainable levels,” the parliamentary Budget Office says in its budget watch report released last month.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.