Kenya’s Treasury Confirms Ongoing Borrowing Amidst Rising Debt Crisis

Despite Kenya’s Sh11.2 trillion debt and a debt-to-GDP ratio of 65.7%, Treasury CS John Mbadi announced that the government will continue borrowing to maintain operations. Concerns about the effective use of these loans were raised during a Senate session, with plans for significant domestic and external borrowing outlined to address budget deficits. The government emphasizes resource allocation efficiency amid ongoing economic challenges.

Kenya’s Treasury Cabinet Secretary, John Mbadi, has reaffirmed the government’s position to continue borrowing despite facing a substantial debt of Sh11.2 trillion. The current debt-to-GDP ratio is at 65.7 percent, significantly exceeding the sustainability threshold of 55 percent. Mbadi justified ongoing borrowing as essential for maintaining government operations during a session before the Senate Finance and Budget Committee.

Senator Mohamed Faki raised concerns regarding the transparency of the government’s loan management, questioning how the borrowed funds contribute to resolving the debt crisis. He noted, “Kenyans are wondering why we are still sinking deeper into debt while there are lingering questions about how these funds are being spent.” The fiscal situation is exacerbated by the fallout from protests that prompted the withdrawal of the contentious 2024 Finance Bill, causing a revenue shortfall of Sh346 billion.

In acknowledging the low trust in President William Ruto’s administration, Mbadi indicated that there are measures underway to ensure the efficient use of public resources including borrowed funds. He stated, “We are working around the clock to ensure borrowed funds are utilized effectively because, eventually, these debts must be repaid.”

The government’s fiscal policy for the financial year ending June 2026 reveals plans to raise Sh684.2 billion through domestic borrowing and Sh146.8 billion externally to address budget deficits. This shift to domestic sources comes after the IMF reduced funding levels, necessitating adjustments in external borrowing targets for the next fiscal year.

Additionally, the Kenya Revenue Authority is tasked with the ambitious goal of collecting Sh1.07 trillion between March and June 2025. The collection targets present a significant challenge given current monthly revenue levels.

Mbadi expressed concerns over a Sh42 billion loan taken shortly after the last general election, questioning the rationale for such urgent borrowing during a transitional period. He mentioned that collaboration with the Auditor-General’s office aims to establish a debt reduction strategy. To ensure efficient resource allocation, all ministries have been directed to prioritize essential funding areas to mitigate any non-expenditure of allocated loans.

The discussion also highlighted the ongoing dispute between governors and MPs over the allocation of the Road Maintenance Levy Fund, with Mbadi advocating for a political resolution to avoid disruptions in service delivery at the county level. He emphasized the need for cooperation to enhance the functionality of devolution, reflecting on his understanding of the Senate’s critical role in the budget process, and apologizing for previous absences due to official commitments.

In conclusion, despite a significant debt of Sh11.2 trillion and a critical debt-to-GDP ratio exceeding sustainable levels, the Kenyan government, represented by Treasury CS John Mbadi, plans to persist in borrowing to maintain public operations. The ongoing evaluation of how loans are utilized, alongside efforts to redirect resources, indicates a commitment to addressing Kenya’s fiscal challenges. Collaboration with the Auditor-General aims to formulate strategies for debt reduction while ensuring service delivery remains uninterrupted during fiscal uncertainty.

Original Source: eastleighvoice.co.ke