Ndindi Nyoro, the Member of Parliament of Kiharu and chairman of the Budget and Appropriations Committee on Monday, May 22, revealed that the government would borrow Ksh530 billion locally in the financial year 2023/2024.
Nyoro stated that Kenya had to rely on itself, as borrowing externally was costly. Restructuring its finances, he added, would also prove Ruto's resolve to resuscitate the economy.
“Out of the Ksh663 billion that we are borrowing, around Ksh530 billion we are borrowing internally because the money outside is too expensive.
“So we want to borrow internally because we have the capacity to borrow internally so that we also show the whole world that Kenya can rely on its resources,” stated Nyoro.
In a statement, the two-term legislator stated that the budget for the next financial year was geared towards repaying the high debt burden accrued in the previous years.
To this effect, Nyoro noted that the upcoming budget would have fewer loans and more local resources from taxes. He stated that the government was considering repaying a debt of around Ksh970 billion.
“In a nutshell, the financial year (FY) 2023/24 budget is sensitive to the current situation of our local and global economy and is allocating resources to the value chains that will deliver optimal outcomes to Kenyans,” he added.
Loans Borrowed
In March 2023, the World Bank Group (WBG) increased money available to Kenya through the Development Policy Operations (DPO) facility to Ksh137 billion.
A month later, on April 17, the National Treasury announced that Kenya would use sovereign bonds to borrow externally. This would be used to repay old debt, and fund state programmes such as roads projects.
“The Government of the Republic of Kenya through the National Treasury is considering accessing the international capital markets before the end of the fiscal year 2023/24 (July 1, 2023, to June 30, 2024) to issue a sovereign bond," noted the Treasury.
International Monetary Fund (IMF) Managing Director Kristalina Georgieva, on May 3, also noted that the IMF would support Kenya's growth by providing necessary support to help the country's economy grow.
“We are going to look at how the Fund can support objectives of stronger growth, more inclusive growth and better economic performance,” she stated.
During a joint media interview on May 15, President William Ruto further reiterated the need for Kenya to improve its tax collection, noting that similar economies to Kenya collect more than Kenya does.
“The real issue is that our tax as a percentage of GDP is still way below what our peers have,” he stated.
Downgraded Credit Ratings
On May 12, Moody’s, a global rating agency, downgraded Kenya’s credit score from B2 to B3.
The impact of the downgrade is that Kenya is considered a risky borrower. Thus, high interest is charged on loans to the country.
“Prior to this rating action, Kenya's ratings were B2 and the outlook was negative. The rating downgrade is driven by an increase in government liquidity risks,” read Moody’s statement in part.
Moody also noted that local investors had a disinterest in Kenya’s treasury bonds.
"Domestic funding conditions have deteriorated considerably over the past two months, with very low net domestic issuance contributing to financing shortfalls and delays in government spending," they added.
In February 2023, the Central Bank of Kenya (CBK) noted that Kenya's debt level was above Ksh9.1 trillion.
