Kenya plans to raise Ksh319 billion on the domestic market in the 2019/2020 fiscal year, the national treasury reveals according to a report published by Business Daily Africa. This represents a 46 percent increase compared to the Ksh217 billion borrowed by the country during the current fiscal year.

In the same wake, the country may reduce its foreign borrowing by 27 percent to Ksh207 billion amid growing focus on its debt, which has more than doubled to reach Ksh5.15 trillion in the past six years.

“The government will increase borrowing from the domestic market and cut on its foreign debt in funding key development projects such as infrastructure” said  Kamau Thugge (Photo), Treasury Principal Secretary, on December 5, 2018.

According to some analysts, this increase in the domestic borrowing may affect investments in the private sector which are already slowed down by the rate cap introduced in September 2016.

In addition, it may come with higher interest rate. Indeed, the interest rate on foreign borrowings has been cheaper than on domestic loans. For instance, the 10-year domestic bond issued in August 2018 came with a 12.69 percent interest rate while the February 2018 5-year Eurobonds’ interest rate was 5.875 percent.

But, though they have been cheaper in the past, with the various ratings published recently by Moody’s and the International Monetary Fund (IMF), the pool of foreign lenders willing to lend to Kenya at cheaper interest rate may decrease.

Let’s note that recently, the Treasury revised the 2019/2020 budget deficit from 5.8% to 4.7%; down from the 7% of last fiscal year.

Mouka Mezonlin