President William Ruto's economic advisor David Ndii has warned of a deep recession should the the country fail to meet its debt obligations.
In response to questions by Kenyans on X, Ndii noted that there would be repercussions should Kenya fail on its obligations despite the tough economic times.
A deep recession is a period of economic downtime characterised by mass job losses, a rise in unemployment and a rise in consumer goods.
"You must tell them to be realistic. What's the worst if we default?" Mutisya Willy stated.
"A deep recession," Ndii responded.
Kenya's outstanding debt as of March 31, 2024, was Ksh10.4 trillion for domestic and foreign debts. However, domestic debts take a majority of the debt portfolio.
Ksh5.16 trillion is owed to external lenders while the country owes Ksh5.26 trillion to domestic lenders such as banks.
According to the Office of the Controller of Budget, the strengthening of the shilling has helped reduce the debt portfolio to Ksh1 trillion.
"Public debt increased 1 per cent from Ksh10.28 trillion as of June 30, 2023, to Ksh11.14 trillion as of December 31, 2023 and reduced to Ksh10.42 trillion as of March 31, 2024.
"Between December 31, 2023, and March 31, 2024, external debt decreased by 15.2 per cent, while domestic debt increased by 9 per cent. This decrease in external debt is due to the strengthening of the Kenyan Shilling against major foreign currencies," the CoB noted in its budget.
The majority of the external debt is owed to countries like China and multinational lenders such as the World Bank and the International Monetary Fund (IMF).
Notably, Kenya has already read the USD 2 Billion Eurobond that was due next month.
On the other hand, President William Ruto has assured that the government will meet all the debt obligations hence his push for Kenya to raise its own revenue.
