Kenya’s Public Debt Crisis: A Call for Reforms

Executive Summary

Kenya’s public debt situation has evolved into a significant challenge, marked by an accelerating debt burden and questions about the legitimacy and transparency of the country’s public debt register. Although public debt can catalyze economic growth, when maintained at manageable levels, Kenya’s excessive borrowing has led to economic uncertainty and distress. Equally, private businesses are increasingly crowded out, while the citizenry is subjected to annual tax increases. Dissecting
Kenya’s debt crisis illustrates that external debt accounts for over half of the debt portfolio. This debt situation is driven by persistent budget deficits, unproductive expenditures, public sector corruption and wastages, and overpriced and politically driven construction projects that yield delayed returns. The implications of the ensuring debt servicing burden are profound with over 70% of government revenue dedicated to debt servicing. The country’s debt situation has equally raised concerns that the country’s current generation is mortgaging the economic viability of future generations. The paper recognizes that despite robust legal frameworks designed to ensure accountability and sustainability in public debt management, gaps in implementation, lack of political goodwill, prevalent political interference, refusal to comply with court orders on
the release of public debt contracts, and lack of transparency hinder effective oversight. Equally, establishing a presidential taskforce in 2024 to audit public debt has sparked controversy, as it complicates the governance landscape of public debt. To address these challenges, the country requires parliament to take its oversight responsibilities seriously. This includes enacting the required legislation for parliament to approve public debt. The office of the Auditor-General should be empowered to issue subpoenas regarding its often ignored request for complete documentation needed for the audit of public debt. Equally, linking future borrowing to specific projects is imperative. Collectively, these policy actions will address concerns of odious debt and restore fiscal responsibility and public trust.