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XINHUA NEWS SERVICE REPORTS FROM THE AFRICAN CONTINENT

 

Local economic analysts caution Kenya on rising public debt stock

NAIROBI (Xinhua) -- Economic analysts on Thursday cautioned Kenya on its rising public debt burden that has risen from a debt to Gross Domestic Product (GDP) ratio of 36.6 percent in 2006 to 50 percent in 2016.

Institute of Economic Affairs (IEA) CEO Kwame Owino told a business forum in Nairobi that Kenya plans to spend 6.2 billion U.S. dollars in debt repayment for the 2017/2018 financial year, up from the 4.6 billion dollars allocated for the current financial year that ends in June.

"Kenya should slow down its borrowing to ensure that its public debt stock remains sustainable and does not affect macroeconomic stability," Owino said during a roundtable forum on budget analysis for the 2017/2018 financial year budget.

Kenya has a budget of 26 billion dollars against revenues of 17 billion dollars. The gap of nine billion dollars will be bridged through a mix of domestic and foreign borrowing.

Owino said interest payment on loans has been rising and risks getting out of line.

According to IEA, the country’s increasing appetite for domestic borrowing, especially short term commercial debt could have an effect on destabilizing local interest rates.

The analysts noted that lack of fiscal discipline through increased borrowing may push up interest rates and in the process crowd out private sector lending and end up affecting macroeconomic stability.

However, Owino lauded Kenya’s move to float a mobile government bond dubbed the M-Akiba to retail investors.

The CEO said that M-Akiba will help diversity sources of public debt.

"It will also put pressure on local banks to reduce their interest rates as they try to compete for loan business," he noted.

 

             

 

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