The country’s fiscal deficit as ratio of GDP reduced to 5.8 percent in the FY 2022/2021 from 8.8 percent in the FY 2021/2022.
The Financial Stability Reports released recently by CBK and other financial regulators indicates that public debt as a ratio of GDP declined to 67.0 percent from 68.4 percent in line with fiscal consolidation.
“The decline in fiscal deficit is due to unwinding of fiscal support to firms, removal of subsidies on some commodities, increase in taxes and widening of the tax base. This is accordance with fiscal consolidation efforts and implementation of medium-term debt strategy, which endeavours to reduce fiscal deficit as a ratio of GDP to less than 3.5 percent,” reads the report.
However, the current Value of Public debt stock breached the threshold of 55 percent, standing at 60. 2 percent of GDP as of September 2022,
The total public debt stock rose by 11.7 percent, from KSh 8.3 trillion in December 2021 to KSh 9.4 trillion in March 2023, the report states.
The country’s fiscal space improved in 2022 on account of increase in revenue and exports as the ratio of debt service to exports and debt service to total revenue declined to 33.4 percent and 36.2 percent in FY 2022/2023 from to 47.9 percent and 39.9 percent in FY 2021/2022.
“The large interest payments and decline in principal amounts in FY 2022/2023 reflect suspension of the principal payments under the Debt Service Suspension Initiative (DSSI). The programme eased fiscal pressures, giving the government space to cushion the vulnerable households from drought and other shocks in 2022. It also incentivised Kenya to improve transparency in debt management,” CBK states in the report.
The report also notes that the overall interest rates on government securities increased in 2022 and the first quarter of 2023. For instance, Treasury bill rates for all the maturities, averaged 9.0 percent in 2022 compared with an average of 7.7 percent in 2021. The weighted average interest rates for both T-bonds and bills rose to 11.1 percent in 2022 compared from 10.1 percent in 2021.
“Increased issuance of long-dated bonds to take advantage of ample market liquidity, led to extension of domestic debt maturity profile in 2022, thus reducing refinancing risk. The average time to maturity for government bonds increased to 8.9 years in December 2022 from 8.2 years in 2021,” reads the report.
