Public debt rises by Ksh 19bn

Government borrowing in the financial markets has risen by Ksh 19.4billion since the beginning of the financial year as Treasury Permanent secretary Joseph Kinyua maintained that there is no cause for alarm.

Kinyua said that the Government does not expect to borrow from the domestic market as it it had realized a substantial increase in dividends paid by parastatals.

The amounts are below the target of Ksh 30 billion and this is the first half of the financial year. There is no possibility of further borrowing since the Government is expected to get double the amount of dividend from parastatals," Kinyua said adding that the latest government borrowing is within a comfortable range. According to the Central Bank of Kenya Monthly Economic Review, in the six months up to 12 January, 2006, the amount borrowed from the local financial markets stood Kshs 377.2 billion. At the end of last June, domestic debt totaled Ksh 357.8 billion.

The increase in debt is attributed to the Government decision to step up borrowing from the markets as it pursues an ambitious development and wage bill expansion.

In simple terms, each Kenyan owes Ksh11,430.30 to the investors, who usually include commercial banks, insurers and pension funds. Over 70 per cent of this is not due at least for the next one year as it was borrowed in form of long-term bonds.

Including the external debt, the total public borrowing comes to Ksh799 billion, meaning every Kenyan has at least Ksh24,000 owed to creditors. The competition for borrowing by the Government in the market has been for years cited by experts as responsible for the relatively high interest rates leading to the crowding out of private sector from borrowing.