•The projections of external debt maturities show that a total of Sh241.1 billion will be due in the current financial year ending June 30.
•According to the National Treasury, Among the redemptions, the largest domestic one in 2024/25 is expected to be FXD1/2020/5, amounting to Sh104.52 billion. This redemption is scheduled for May 2025.
Image: EZEKIEL AMING'A
Kenyas debt has dropped by Sh380 billion from a high of Sh11.14 trillion to Sh10.87 trillion, data from the Central Bank of Kenya shows.
This, even as the government continues to phase heightened repayments.
Kenya last year spent an equivalent of two-thirds of tax revenues to service mounting debt obligations to domestic and external creditors.
The projections of external debt maturities show that a total of Sh241.1 billion will be due in the current financial year ending June 30.
This is expected to go up to Sh475.5 billion, and Sh596 billion in the following two financial years.
President William Ruto’s administration has in recent months been keen on increasing tax revenues to fund government spending, in a move aimed at reducing borrowing.
"We are not in that position that we can default and the people of Kenya can be rest assured we are not going to fail on our obligations," the President said during a past media interview.
From the tabled estimates, for the next financial year, the fiscal deficit is projected at 2.9 per cent of GDP, the lowest in 15 years, whose funding will be through a net external borrowing of Sh256.8 billion coupled with a net domestic borrowing of Sh257.9 billion.
This means President Ruto's government is planning to borrow equally in the external and domestic market, in what could reduce dollar-denominated loans.
The total new public debt requirement for 2024-25 financial year is set to decline by 1.8 per cent to Sh1.9 trillion from Sh1.8trillion, in the current financial year as per the Supplementary Budget II.
“For the medium term, borrowed funds will be limited to purposes of financing development and not for recurrent expenditure, which is in line with the Public Finance Management (PFM) Act Section 15,” reads the budget policy statement.
Notably, according to the estimates, external borrowing to domestic borrowing composition is estimated to shift to 50:50, from 55:45 as per the 2023/24 financial year’s Supplementary Budget II.
The tabled budget estimates for the fiscal year further draw significant changes in debt service obligations, particularly as the period ending in June 2025 approaches.
The aggregate figure for debt service has risen by Sh44.54 billion, reaching Sh1.76 trillion.
In the period, the amount for domestic redemptions will remain steady at Sh512.58 billion, marking the first time that domestic redemptions have surpassed the Sh500 billion threshold.
According to the National Treasury, among the redemptions, the largest domestic one in 2024-25 is expected to be a five-year bond-FXD1/2020/5, amounting to Sh104.52 billion.
This redemption is scheduled for May 2025.
It was issued for budgetary support to the government in 2019-2020.
Domestic redemption refers to the repayment of debt obligations that are issued and held within the country's borders.
In the context of government finances, domestic redemption typically pertains to the repayment of government bonds or securities that are owned by domestic investors, such as banks, financial institutions, businesses, or individuals.
Domestic interest payments have increased by Sh7.86 billion, totaling Sh654.22 billion. External redemptions have seen a significant increase of Sh49.25 billion, reaching Sh330.71 billion.
The largest external redemption in 2024-25 amounts to Sh101.14 billion and is owed to the Exim Bank of China.
In contrast, external interest payments have decreased by Sh12.58 billion, now standing at Sh259.91 billion.
About Sh750 billion of next year’s budget would go to interest payments for domestic debt, Sh260 billion for foreign debt interest
Total borrowing is expected to decline by 43.4per cent to Sh514.7 bn from Sh908.6 billion as per the current financial Supplementary Budget II, in a bid to reduce Kenya’s public debt burden which is estimated at 67.2 per cent of GDP currently.
This is 12.2 per cent points above the East African Community (EAC) Monetary Union Protocol, the World Bank Country Policy and Institutional Assessment Index, and the IMF threshold of 55.0 per cent.
The headache of servicing external debt has been heightened by aggressive interest rate hikes by central banks in rich countries in the battle against inflation amid the sustained weakening of the shilling.
The Kenyan currency has, for example, shed about a fifth of its value against the US dollar in the past year.