Kenya’s Public Debt Hits Ksh5.8 Trillion As Economy Growth Slumps

Kenya’s debt as at end of June 2019 increased by 3.6 percent month-on-month to Ksh5.809 trillion.

According to the Economic brief by Kenya Commercial Bank, year-on-year debt grew by 15.3 percent driven by 18.1 percent growth in external debt as domestic debt grew 12.4 percent. External debt accounts for 52.0 percent of total debt while domestic debt is 48.0 percent.

By June 2019 the domestic debt was recorded at Ksh2.786 trillion. Treasury bills accounted for 34.3 percent of total debt while the treasury bonds accounted for 62.8 percent. The major holders of government domestic debt as at end of September 2019 were banking institutions at 53.8 percent, Pension funds at 28.6 percent, Parastatals at 7.1 percent and insurance companies at 6.2 percent.

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Kenya’s debt to GDP ratio in 2019 is estimated to grow to 64.0 percent, higher than 59.2 percent as at end of December 2018; attributed to higher average growth in debt versus nominal GDP growth.

The report notes that the economy is estimated to have grown by 5.6 percent in Q2 2019 as compared to 6.4 percent in the same quarter 2018 curtailed mostly by a slowdown in activities of agriculture, manufacturing and transportation.

“The growth, though smaller than previous year, still saw impressive performances by certain
sectors, but the overall growth was curtailed mostly by a slowdown in activities of agriculture, manufacturing and transportation. Agriculture’s performance (4.1%) as well as that of electricity and water supply (5.6%) were mostly hampered by a delay in the onset of the long rains,” notes the report.

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Transportation industry performance stood at 7.2%, and was negatively impacted on by rise in prices of fuel. On the other hand, accommodation and food services averaged 10.6%, information and communication (11.6%), wholesale and retail trade (5.8%), and construction (7.2%) industries maintained high growths and thereby supported the overall GDP growth.

“Information and communication sector posted the fastest growth of 11.6% during the review quarter
followed by accommodation and food services and construction which recorded growths of 10.6% and 7.2%, respectively. Financial and insurance sector registered growth of 6.7% in Q2 2019, compared to 3.9% in Q2 2018,” added the report.

Overall inflation decreased to 3.83 percent in September 2019 from 5.0 percent in August 2019
attributed to decreases in prices of food commodities. Inflation averaged 5.1 percent during the first three quarters of 2019.

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The Kenya shilling depreciated slightly in the month of September 2019 to close the month at Ksh103.81 compared to Ksh103.30 in the previous month of August 2019, an appreciation of 0.5 percent. The shilling has averaged Ksh101.81 YTD, compared to 101.08 same period last year.

Private sector credit grew by 6.3% in the 12 months to August, compared to 6.1% in July. Strong growth in credit to the private sector was observed in the following sectors: trade (8.4%);manufacturing (7.5%); consumer durables (23.0%); private households (8.6%); and finance and insurance (6.3%).

The yield on the 91-day, 182 day and 364-day Treasury bills averaged 6.34%, 7.12% and 9.65% respectively in September 2019. The 182-day tenor was under-subscribed at 87.4, while the 91 day and 364 day tenors were over-subscribed at 27.1% and 55.3% respectively.

The Monetary Policy Committee of the central bank last met on September 23rd 2019 and
retained the CBR at 9.0%.

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