- Kenya borrows Sh3.43 billion to cover deficits in payments on external debt caused by changes in foreign currency rates.
- Growing concerns over the impact of the sliding shilling on Kenya's debt profile as foreign debt constitutes 52.9% of the country's total debt.
According to the Auditor-General, the devaluation of the shilling against the US dollar in the first half of the fiscal year 2022–23 required Kenya to borrow Sh3.43 billion to fill the budget shortfall in the foreign debt service commitments.
In order to protect the taxpayer from increased debt service requirements brought on by the foreign exchange exposure component of the nation's stock of public debt, the Auditor-General has now requested that the Treasury adopt hedging.
Based on recent information from the Controller of Budget, Sh3.43 billion was granted in the first half of 2022/23 to make up for deficits in payments on external debt caused by changes in foreign currency rates, according to the Auditor-General.
The worries come at a time when new information from the Central Bank of Kenya (CBK) indicates that the country's public debt stock closed April 2023 at Sh9.63 trillion, with 52.9% of that debt being made up of foreign debt, up from 50.9% in January, indicating the impact of the sliding shilling on the country's debt profile.
According to CBK statistics, the shilling has lost 13.9% of its value against the US dollar since the year 2023 began, and it is currently worth 140.52 units.
In an effort to relieve pressure on the local currency, the government announced in March a contract to purchase petroleum products from Saudi Aramco and the Abu Dhabi National Oil Company on credit for a period of six months.
With the surprising news that the government paid Sh680 million for loans it had not yet drawn down on in the first half of the fiscal year 2022–23, the Office of the Auditor General has also highlighted concerns about the growing weight of commitment fees generated by secured but unused loans.
The Auditor has called for a greater degree of transparency and criticized what she termed opacity in the way liabilities are recorded at both the national and local levels of government.
“There is the non-disclosure of loans and overdrafts held by other national and county government entities as well as other government liabilities such as pending bills and pension arrears. The government continues to pay commitment fees on undrawn amounts in respect of loans signed between the government of Kenya and foreign lenders. Within the first half of 2022/23, the National Treasury paid commitment fees worth Sh680 million,” the audit office reports.