The Institute of Public Accountants of Kenya is urging caution over the increasing public debt despite the Bretton Woods institutions’ stand that the country’s borrowing level is manageable.
They want the government to introduce a cap on the percentage of external resources to the total national budget.
The accountants said the rising public debt could pose substantial risk to the country’s financial stability.
CONSIDERED LOW RISK
“Icpak is concerned that IMF debt sustainability assessment still considers Kenya’s public debt as sustainable and low risk; The public debt portfolio is huge and might pose a substantial risk to the government’s balance sheet and the country’s financial stability,” said the institute’s chairman, Mr Benson Okundi.
He spoke yesterday during the opening of the 23rd economic symposium at the KICC, Nairobi, where accountants also called for strengthening of the Public Debt Management Office to ensure borrowing is maintained at low costs.
They singled out effects of increasing public debt, mounting public expenditure, insecurity and terrorism as the greatest challenges the economy continues to face.
“Public borrowing has a profound effect on various dimensions of the economy such as distribution, capital development, income, employment stability and economic growth among many others,” they said.
The experts noted that Kenya’s overall public debt has been stable in recent years at around 41 and 42 per cent of Gross Domestic Product since 2010.
According to data from the Central Bank of Kenya, by December 2014, total public debt rose to Sh2.45 trillion from Sh1.72 trillion the previous year. This figure comprises Sh1.3 trillion domestic debt and Sh1.17 trillion external debt.
PROJECT TO PEAK
This increase is equivalent to 43.1 per cent of GDP as total public debt, which is an increase from 38.5 per cent of GDP in 2012/13.
These figures are projected to peak in 2015 and lift the public debt to around 46 per cent of GDP in 2015, mainly due to the sovereign bond issuance and railway loan disbursements.
Kenya’s debt to GDP ratio stood at 43.07 per cent in 2014 against 36.1 per cent in 2013, which indicates a worsening debt burden.