Cytonn calls for caution on Treasury’s borrowing binge

Kenya’s debt sustainability continues to raise concerns with investment firm Cytonn calling for caution on treasury’s borrowing binge.

The company says heavy investment in infrastructure is yet to pay off with economic growth projected to tank to 5.5 percent this year.

This comes even as top officials from the National Treasury camp in Washington promoting a planned sovereign bond seeking to rise up to 304 billion shillings.

Kenya’s public debt to gross domestic product continues to pile with varying estimates putting it at between 52 to 56 percent.

This has caused concern with various local and international agencies calling for caution.

However, despite debt fears raised by the International Monetary Fund (IMF), World Bank and most recently the African Development Bank (AfDB), the National Treasury has remained adamant that Kenya’s debt is serviceable.

Currently, top treasury bureaucrats led by the Cabinet Secretary are in Washington to market Kenya’s second Eurobond debt which seeks to rise between 1.5 and 3 billion dollars.

Kenya’s foreign debt stands at close to 3 trillion shillings which is set to rise with the planned Eurobond and borrowing from the domestic market.

Cytonn says Kenya’s continued investment is yet to have an impact on the country’s growth, with expected GDP growth of 5.5 percent this year, which is the slowest expansion in 7 years.

Next week top managers from the IMF are expected to meet the National Treasury to discuss the thorny issue of the budget deficit.

A shortfall in tax revenue that has resulted in a widening budget deficit despite goals to reduce this to 3.4% of GDP by the fiscal year 2020/21; the deficit, which currently stands at 7.9% of GDP, is being plugged in through borrowing both locally and from the external market.

Last week, a debt management report by the national treasury said Kenya borrowed more than 700 billion shillings from the international market with China lending the country more than 500 billion shillings.

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