Kenya, IMF clash on reforms pushing debt past Sh9trn ceiling

Treasury Cabinet Secretary Ukur Yatani (centre) with Economic Secretary Geoffrey Mwau (right) at a budget forum last week. PHOTO | DIANA NGILA A push by the International Monetary Fund to recognise government guarantees and parastatal debts as part of Kenya’s loans will raise debt by Sh3.4 trillion, crashing through the recent Sh9 trillion ceiling endorsed by Parliament.

The IMF says that Kenya’s Selected Specific Fiscal Risks covers seven of the 11 major risk categories identified as important internationally, but does not provide estimates of their magnitude.

Crucial information missing includes government lending programmes, government guarantees, exposure of the financial sector to risk, and legal claims.

“The lack of quantification does not enable an assessment of the potential fiscal impact, nor help develop a prioritised risk mitigation strategy,” the report read.

IMF report on the state of Kenya’s books shows that the government has guaranteed Sh139 billion, which includes the Sh75 billion given to struggling Kenya Airways #ticker:KQ it wants to nationalise.

Public-Private Partnership deals whose contracts remain secret are valued at Sh679 billion by the IMF.

A list of 30 PPP contracts was presented in the 2019 Budget Policy statement while another list of 78 pipeline projects was published in the PPP Pipeline Status Report with a total value of $11.4 billion (Sh1.140 trillion), almost half of which are concentrated in six projects, all of which are at the procurement stage.

Public companies, most of which are loss-making, have a liability of Sh1.494 trillion.

Kenya Deposit Insurance Corporation (KDIC), which wants to take up more responsibility of insuring deposits up to Sh500,000 from July this year, already has an exposure of Sh261 billion for covering deposits up to Sh100,000.

Outstanding pending bills for land compensation reported by the Infrastructure department have a potential to set the country back Sh23 billion. This is without legal claims like litigation on tax issues or procurement disputes.

Net present value of pensions is Sh819 billion as of April 2018, according to the IMF fiscal monitor with an estimated 20,000 civil servants projected to retire every year.In November, Parliament gave the government room to raise Kenya’s debt ceiling to Sh9 trillion, giving the Treasury the green light to add about Sh2.6 trillion to the exisiting Sh6.4 trillion expected in June.According to the Treasury, the Sh9 trillion figure will be reached by June 2024. Raising the ceiling means the Senators were doing away with the borrowing limit tied to 50 percent of the GDP.Treasury officials, […]

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