Dip in shilling sees external debt budget balloon by Sh216.7b
Business
By
Josphat Thiong'o
| Nov 15, 2023
The government has been forced to increase the money allocated towards repayment of external debts by Sh216.67 billion in the last three months due to the depreciation of the Kenya Shilling.
Controller of Budget (CoB) ="https://www.standardmedia.co.ke/business/business/article/2001481936/public-debt-rose-due-to-weak-shilling-says-budget-controller">Margaret Nyakang'o on Tuesday< told the National Assembly Committee on Public Debt and Privatisation that the funds have been factored in the supplementary Budget estimates.
She said that the current economic environment had seen the budget of government ministries, departments and agencies (MDAs) reviewed upwards.
"The increase in the supplementary estimates for external debt service by Sh216.67 billion (principal redemption and interest repayment) to Sh839.14 billion from Sh622.47 billion is partly attributed to the depreciation of the Kenya Shilling," said Dr Nyakang'o.
READ MORE
Crushing defiance and ignoring graft sends the wrong message
EU to unveil long-delayed 2040 climate target
Nursing courses top demand as KUCCPS places 310,502 students
From dorm fires to street protests; how a decade of school unrest shaped youth dissent
Push to review occupational safety and health laws
President Ruto calls for fairness, partnership at Global Financing Conference
The Finance Bill that soured Ruto's relationship with Gen Zs
Govt concludes University placement and commits to funding
Our youth are still sufferring a year after protests, Babu warns
Hope in Faith: Kenyans confident Kipyegon will break 4-minute barrier
The CoB attributed the increase in loan interests on the exchange rate fluctuations which she said had a huge impact on the cost of guaranteed debt.
She explained that in the last three months, public debt received the highest Exchequer disbursements of Sh440.4 billion, which accounted for 89.3 per cent of all Exchequer issues for the period under review to service public debt.
"As of April 30, 2023, the exchange rate, for instance, was Sh136.0 to the dollar but the same depreciated to Sh151.4 to the dollar by November 7, 2023. This represented a significant loss in the value of the shilling which in turn affects our debt repayment ability," she said.
="https://www.standardmedia.co.ke/business/business-news/article/2001400418/kenya-borrows-sh560b-in-five-months-to-plug-budget-deficit">Documents tabled by Nyakang'o< showed there was a positive variance of Sh18.09 billion which translates to 2.9 per cent on interest payments on domestic debt and a positive variance of Sh125.61 billion on external debt interest payments which translates to 85.5 percent
"Cumulatively, there is a positive variance of Sh143.7 billion or 18.5 per cent in domestic and external debt interest payments suggesting a significant rise in total interest payments costs," read the documents.
And to manage the high cost of debt servicing, the CoB wants the government to implement measures to curb the further deterioration of the shilling against the dollar such as public debt restructuring, where an ="https://www.standardmedia.co.ke/business/business/article/2001475273/treasury-under-debt-pressure-as-borrowing-window-narrows">agreement with bilateral< creditors to review debt repayment terms is explored.
"Considering the current public debt levels, new public borrowing should only be undertaken for projects that will positively impact the national budget. And as part of the public debt management, there is need for a review of government accounting policies to ensure the accurate reporting of public debt that will match borrowed funds to the projects," read the documents.