FINANCE – A Pandemic Amidst An Imminent Debt Crunch
How will the changing nature of Kenya’s public debt impact the country’s growth in the future?
PART A: UNDERLYING TRENDS
Owing to unproductive spending and a growing dependence on commercial loans, Kenya is facing a potential debt crisis.
- Kenya’s debt has been rising since 2013 and growing interest costs are placing downward pressure on government spending.
- Kenya’s rising debt level has been caused by – among other things – unproductive spending.
- Over the long-term, certain factors may help avert a debt crisis, such as the attraction of private sector investment, the discovery of oil and demands from youth for fiscal accountability.
PART B: IMPACT OF COVID-19 ON FINANCE IN KENYA
COVID-19 has placed further strain on Kenya’s challenging financial situation.
PART C: CONCLUSION
What might a deeper deficit mean for economic transformation?
- Narrowing fiscal space may put political pressure on reform efforts already underway.
- Kenya will need investment to boost private sector growth, alleviate fiscal pressure, and put the country on a path to transformative growth.
- Channeling appropriate finance requires a clear vision and prioritising strategic projects in the right sectors.