Before you vote: The truth about public debt


Before you vote: The truth about public debt

Between February 2016 to February this year alone, the debt increased by 18 per cent from 3.3 trillion to 3.9 trillion.

This jubilee government has choked us with debt. These people have taken debts that have now reached four trillion.” - Mr Musalia Mudavadi during a rally in Kilifi on June 8, 2017

The national public debt in February 2017 more than doubled to Sh3.9 trillion from Sh1.54 trillion in February 2012, according to data from the Central Bank of Kenya.

In other words, the Jubilee government took four years, two months to accumulate more debt than past administrations accumulated in nearly 50 years.

The upsurge in public borrowing has seen the debt burden on each Kenyan more than double over five years, from Sh37,838 to Sh85,900 from 2011 to 2016 a Nation Newsplex review of economic data reveals.

Between February 2016 to February this year alone, the debt increased by 18 per cent from 3.3 trillion to 3.9 trillion.

The upsurge in public borrowing has seen the debt burden on each Kenyan more than double over five years, from Sh37,838 to Sh85,900 from 2011 to 2016 a Nation Newsplex review of economic data reveals.

Kenya’s debt per capita is 59 per cent more than the Sh54,000 average monthly wage in 2016 and 16 times as much as the minimum monthly wage of Sh5,437 for unskilled workers.

More than half (51 per cent) of public debt in 2016, equivalent to Sh2 trillion was borrowed externally while Sh1.9 trillion (49 per cent) was borrowed internally. One in five shillings went towards servicing public debt in the 2016/2017 national budget.

DEBT SERVICE CHARGE

Critics argue that if the debt is not controlled it will in the long run expose the economy to systemic risks.

The debt-to-GDP ratio stood at 51.5 per cent in the second quarter of 2016. A high debt-to-GDP ratio may make it more difficult for a country to pay debts and could lead creditors to seek higher interest rates when lending.

In the Budget Review Outlook Paper of 2015 the debt-to-GDP ratio was projected to reach 63 per cent in the fiscal year 2018/2019. A study by the World Bank found that if the debt-to-GDP ratio exceeds 64 per cent in emerging markets, it slows economic growth by two per cent each year.

The debt service charge have been increasing in the last five fiscal years, with the exception of the fiscal year 2011/2012 when there was a slight dip.

Annual Debt service refers to the total amount required each year to make payments on the principal and interest on long-term loans, bond interest and the principals of maturing bonds. The net debt servicing charges grew by 72 per cent from Sh253.5 billion in 2012/13 to Sh435.6 billion in 2016/2017.

On March 31, 2017, Kenya’s public debt rose to Sh4.04 trillion.

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