Kenya plans to intensify fiscal consolidation in the medium term in order to reduce the risk of a public debt distress, National Treasury Principal Secretary Julius Muia says.
Muia said the public debt currently stands at about 58% of the Gross Domestic Product (GDP) which is below the (IMF) threshold level of debt distress.
“In order to ensure that public debt remains sustainable, the government will continue with fiscal consolidation to contain the budget deficit within reasonable limits,” he said.
Data from the National Treasury indicate that approximately Ksh 652 billion (US$6.5 billion) was allocated for the repayment of public debt in the 2017/2018 financial year, up from Ksh 431 billion in the previous financial year.
Muia said the government is, therefore, keen to reduce the quantity and ratio to GDP of the public debt in order to avoid crowding out the private sector in the credit market.
He said public debt levels have been on the increase in the past decade due to the need to bridge infrastructure deficit.
He said the bulk of the national debt has been incurred to finance infrastructure projects for the national development blue print Vision 2030.
He noted that 70% of the country’s infrastructure projects will be financed by the private sector but the government will be required to put upfront investment in order to de-risk the infrastructure sector.
The PS said Kenya has maintained prudent macro-economic policies to ensure that public debt is used for public investment and not for consumption.
He observed that the borrowed funds have also been used to create employment opportunities as well as open up remote areas for further private sector investments.