As of January 2024, Kenya’s total public and publicly guaranteed debt stood at Ksh. 11,248.01 billion, equivalent to USD 69.97 billion. This represents 69.7% of the country’s Gross Domestic Product (GDP), with domestic debt accounting for 31.3% (Ksh. 5,058.04 billion) and external debt making up 38.4% (Ksh. 6,189.97 billion). The ratio of domestic to external debt remains relatively balanced, with domestic debt comprising 45% of the total, while external debt constitutes 55%.
1. Movement in Exchange Rates
Kenya’s external debt is primarily denominated in five major currencies: the U.S. dollar (USD), Euro, Japanese Yen, Chinese Yuan, and the British Pound (GBP). Over the month of January 2024, the Kenyan shilling depreciated against most of these currencies. It fell by 2.7% against the USD, 0.1% against the Euro, 1.5% against the Chinese Yuan, and 2% against the Sterling Pound. Conversely, the shilling appreciated by 2% against the Japanese Yen. The base exchange rates for these currencies were as follows:
- USD: Ksh. 156.46
- Euro: Ksh. 173.78
- Yen: Ksh. 111.00
- Yuan: Ksh. 22.05
- Sterling Pound: Ksh. 199.80
2. External Debt Composition
The National Government’s external debt increased by Ksh. 100.38 billion from December 2023 to January 2024, rising from Ksh. 6,089.58 billion to Ksh. 6,189.97 billion. This increase was driven by both new disbursements and the depreciation of the Kenyan shilling against key global currencies.
- Bilateral Debt: A slight decrease of Ksh. 19.45 billion, from Ksh. 1,331.40 billion to Ksh. 1,311.94 billion.
- Multilateral Debt: Increased by Ksh. 57.46 billion, from Ksh. 3,061.11 billion to Ksh. 3,118.57 billion.
- Commercial Debt: Increased by Ksh. 62.85 billion, from Ksh. 1,513.99 billion to Ksh. 1,576.85 billion.
- Publicly Guaranteed Debt: Decreased slightly by Ksh. 0.48 billion, from Ksh. 183.08 billion to Ksh. 182.61 billion.
3. Currency Composition of External Debt
As of January 2024, Kenya’s external debt is heavily concentrated in a few key currencies:
- USD: 67.3%
- Euro: 21.4%
- Yen: 3.8%
- Yuan: 5.1%
- Sterling Pound: 2.2%
- Other Currencies (including Danish Kroner, Kuwaiti Dinar, Korean Won, etc.): 0.2%
This currency distribution reflects Kenya’s efforts to diversify its external debt, a strategy aimed at mitigating the risks posed by exchange rate fluctuations.
4. External Debt Service
As of January 2024, Kenya’s cumulative external debt service stood at Ksh. 338.27 billion, which is below the financial year target of Ksh. 879.46 billion. Of this, Ksh. 93.34 billion was paid in January 2024 alone, comprising:
- Principal Repayments: Ksh. 56.09 billion
- Interest Payments: Ksh. 37.25 billion
The breakdown of the external debt service by creditor type was as follows:
- Bilateral Creditors: 54%
- Commercial Creditors: 27.9%
- Multilateral Creditors: 16.1%
- Guaranteed Debt: 2%
5. Domestic Debt Composition
Kenya’s domestic debt stock increased by Ksh. 7.94 billion, from Ksh. 5,050.11 billion in December 2023 to Ksh. 5,058.04 billion in January 2024. Notable changes within the domestic debt include:
- Treasury Bills: Increased by Ksh. 18.73 billion, from Ksh. 546.90 billion to Ksh. 565.63 billion.
- Treasury Bonds: A slight increase of Ksh. 0.44 billion, from Ksh. 4,271.82 billion to Ksh. 4,272.25 billion.
- Other Domestic Debt: Decreased by Ksh. 11.23 billion, from Ksh. 231.39 billion to Ksh. 220.16 billion.
6. Domestic Borrowing and Debt Instruments
In January 2024, the government advertised a total of Ksh. 146 billion in government securities. The total bids received amounted to Ksh. 184.93 billion, with successful bids totaling Ksh. 157.04 billion, comprising Ksh. 120.27 billion in Treasury bills and Ksh. 36.77 billion in Treasury bonds.
The overall net domestic borrowing by the government for the fiscal year 2023/24 as of January 2024 stood at Ksh. 257.32 billion, which is on track to meet the annual target of Ksh. 422.75 billion.
7. Interest Rates and Domestic Debt Service
Interest rates on Treasury bills showed a marginal increase in January 2024:
- 91-day Treasury Bills: 16.11% (up from 15.70% in December 2023)
- 182-day Treasury Bills: 16.14% (up from 15.80%)
- 364-day Treasury Bills: 16.32% (up from 15.81%)
Cumulative domestic interest payments at the end of January 2024 stood at Ksh. 339.19 billion, against a target of Ksh. 646.36 billion for the fiscal year. In January alone, interest payments on Treasury bills and bonds totaled Ksh. 38.08 billion.
8. Sovereign Credit Rating
Kenya’s sovereign credit rating has remained under review, with the country holding a B rating from Standard & Poor’s (S&P), Fitch, and Moody’s. However, both S&P and Fitch maintain a negative outlook, while Moody’s has downgraded Kenya’s rating to B3 with a negative outlook as of July 2023. To improve its credit rating and reduce borrowing costs, Kenya needs to focus on fiscal consolidation, increasing foreign exchange reserves, and boosting economic growth.
Conclusion
Kenya’s public debt situation as of January 2024 reflects a complex mix of domestic and external borrowing. While the country continues to face challenges related to exchange rate fluctuations and the rising cost of debt service, efforts to diversify the currency composition and manage borrowing costs are crucial for maintaining fiscal stability. Moving forward, a focus on long-term fiscal sustainability, improving export performance, and enhancing foreign reserves will be key to improving Kenya’s credit rating and reducing reliance on expensive debt.
Source: Central Bank of Kenya
