The International Monetary Fund (IMF) has raised alarm over Kenya's debt which has hit a record high of Sh4.6 trillion.
Speaking to the National Assembly’s Budget and Appropriations Committee, senior IMF officials noted that Kenya risked losing investors and its economic gains if the government did not contain the debt.
IMF representatives for Kenya; Jan Mikkelsen, Ben Clements and Nike Hobdari, told parliamentarians that the debt would become uncontrollable if action was not taken fast.
“We have been concerned about the flow of new debts and the size of revenue deficit. It will reach a point where the debt is not manageable especially when the deficit continues to rise,” Mikkelsen stated.
[caption caption="Senior IMF representatives for Kenya Jan Mikkelsen"]
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“The revenue deficit we saw last year if it continues it will not be sustainable to maintain the debt. The government does agree with this and our advice is to lower the deficit to make sure that the debt does not increase any further,” Mikkelsen added.
The IMF representatives further disclosed that they were engaging the government to devise measures to contain the debt.
Adding his voice on the issue, Clements stated: “I would not be the first one to state that Kenya may lose the gains it has made. Let’s start moving in the right direction. The unsustainable economy may drive away investors while managing the debt and deficit will attract investors in the country."
The IMF officials urged the government to abolish the 4 percent interest rate on loans by banks on grounds that it was benefitting the government and corporate firms while holding down small and medium enterprises.
Mikkelsen pointed out that the interest rate cap had made it difficult for persons running SMEs to access loans from banks.
[caption caption="Senior IMF representatives for Kenya Jan Mikkelsen"]
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China is the biggest lender to Kenya with their loan standing at Sh520 billion as compared to Japan that has lent the government Sh82.5 billion, followed by France which Kenya owes Sh62.3 billion.
