Ex-CBK boss calls for debt solution

Former Central Bank of Kenya (CBK) Governor Njuguna Ndung’u has called for more prudent debt management strategies to pull the country out of the debt hole.  

Prof Ndung’u (pictured), who currently serves as an economist at the African Economic Research Consortium, said while Kenya is unlikely to default on its debt repayments, the government needs to come up with better domestic resource mobilisation to ensure sustainable economic development.

“Domestic resource mobilisation is a broader concept that looks at fiscal policy and also looks at revenue allocation and creating incentives,” he said. 

Ndung’u was speaking on the sidelines of the recent African Economic Research Consortium (AERC) Biannual Research Workshop held under the theme “Covid-19 Pandemic and Public Finance in Africa: Challenges and Opportunities.”

The government is struggling to bridge a yawning budget deficit estimated at Sh952.9 billion in the upcoming financial year 2021/2022 amid dwindling revenues and piling debt.

The government has already deferred debt payments from bilateral lenders such as China and the G20 group, a collection of twenty of the world’s largest economies formed in 1999. National Treasury says the debt suspension will free up at least Sh78.17 billion by the end of this month.

Deferring repayments could result in a debt pile-up over the medium term.

Kenya will have to put together Sh96.7 billion as debt payment to China Starting next month, including the first installment for the Nairobi-Naivasha phase of the Standard Gauge Railway (SGR). This follows the end of the six-month debt repayment holiday that Kenya received under the auspices of G-20, a group of wealthy countries.

Kenya was from January 21 supposed to start repaying the Sh162 billion China loan used to build the Nairobi-Naivasha SGR line.

Treasury recently disclosed that a Sh162 billion debt from the Exim Bank of China that Kenya tapped in December 2015 had fallen due.

Brenda Kerubo