Ruto government borrows Sh500bn in three months
President William Ruto’s administration has borrowed more than Sh500 billion in three months since assuming office, building on the legacy of the former Jubilee government’s high appetite for loans.
A report by the Central Bank of Kenya (CBK) shows that the government borrowed a total of Sh506.9 billion in September, October, and November alone; almost double the average quarterly borrowing by former President Uhuru Kenyatta’s government.
The loans, which went into financing budget deficits, translate to an average of Sh5.57 billion in new debt per day, between September 1 and November 30, 2022.
Deficit financing is when a government spends more money than it receives as revenue, with the difference being made up by borrowing or other funding such as the sale of a stake in government agencies. No public agency has been privatised lately, meaning that the deficit was wholly financed through domestic and foreign debt.
A monthly economic review report by the CBK for November shows that in September, the government borrowed Sh132.69 billion, constituting Sh101.57 billion in domestic deficit financing and Sh31.12 billion in foreign deficit financing.
In October, the government sourced Sh110.2 billion and Sh44.32 billion from domestic and foreign financiers to plug budget deficits, totalling Sh154.5 billion.
Government borrowing jumped 42 per cent in November to hit Sh219.75 billion compared to the previous month, adding up the total debt taken over the three months from September to Sh506.98 billion.
The borrowing in November was the highest amount tapped in a single month since President Ruto’s regime took office and translated to an average Sh7.3 billion in loans per day.
“[It] includes public and publicly-guaranteed foreign currency loan inflows,” the report says on the government’s foreign borrowing.
Domestic market
The CBK report shows that President Ruto’s government borrowed heavily from the domestic market, with Sh392.5 billion (77.4 per cent) of the amount borrowed domestically. Foreign deficit financing totalled Sh114.47 billion (22.6 per cent) of the total money borrowed through the three months.
It also says that the figures on the government’s domestic deficit financing are ‘net of Central government deposits at the Central Bank’.
“Deficit financing comprises external borrowing, domestic borrowing, and sales of government shares in government agencies (privatisation),” the report says.
The government did not privatise any of its agencies during the period, with the privatisation Bill having just been released this past week for public participation.
The report shows that Kenya’s public debt hit Sh8.89 trillion by November 2022 from Sh8.117 trillion in November 2021, a Sh781 billion increase.
Since assuming office, President Ruto has spoken openly against growing the public debt, indicating his objective was to grow government revenues and cut non-essential spending as a way to reduce budget deficits and slow down on borrowing.
The President has also been critical of President Kenyatta’s borrowing record, terming it unsustainable.
“We must stabilise our public finances. This year, we will spend 60 per cent of our revenues to service our debt. We are faced with Sh600 billion in pending bills for goods and services supplied to the government. Clearly, we are living beyond our means. This situation must be corrected,” the President said after his inauguration in September.
He later ordered a Sh300 billion cut on government expenditures in the 2022/23 budget, while he gave Kenya Revenue Authority targets to raise Sh3 trillion in revenues during the next financial year, up from the Sh2 trillion the authority collected in 2021/22. BY DAILY NATION
Post a Comment