The International Monetary Fund has cautioned Kenya against adding more debt.
“We do advise Kenya to be somewhat more cautious in building debt, but we have seen good macroeconomic policies in Kenya,” IMF Managing Director Kristalina Georgieva told Bloomberg in an interview on Tuesday.
Georgieva said although IMF’s engagement and programmes with Kenya are positive, like other African states, the debt has reached distressed levels.
“In some cases, we are concerned, in others, we see that investing is going to pay off over time,” Georgieva said in Berlin.
Parliament on October 9 approved a National Treasury’s request to change the law and increase the cap for state borrowing to Sh9.1 trillion, giving a leeway increase more public debt that experts say is getting out of hand.
In a unanimously vote, the legislators amended a law that limited public debt at half of the GDP, thus allowing Treasury to borrow an additional Sh3 trillion in the future.
In an indication that the government is broke, Acting Treasury CS Ukur Yatani told the National Assembly’s Committee on Delegated Legislation that “maintaining the current debt ceiling limits the government’s ability to fully implement the 2019-20 budget and subsequent years”.
Kikuyu MP Kimani Ichung’wa, who is the Budget and Appropriations Committee chairman said Kenya had surpassed its debt ceiling.
“Debt on its own is not bad, it is bad when it goes for the wrong things, and when it goes with a speed that the economy cannot handle,” Georgieva said.
“In cases where debt is dangerous — take Zambia – we do say, you need to really get a handle on your debt. In other cases, like Ethiopia, we say you do need to renegotiate some of your debt.”
World Bank on October 9 also warned that Kenya is drifting towards debt distress, owing to a huge appetite for expensive loans.
The total public debt hit Sh5.7 trillion in June this year, which is now 62 per cent of the GDP.