Relief for taxpayers as debt cost set to fall Sh174 billion

The cost of repaying debts will for the first time in many years fall in July by Sh174.1 billion due to Treasury’s drive for longer maturing loans, offering a brief relief to taxpayers.

Debt repayments in the year starting July will drop to Sh696.5 billion, down from the Sh870.6 billion that will be consumed by loan payments in the current year, a 20 per cent drop.

This will ease pressure on taxpayers and offer the Treasury cash for building roads, affordable housing and revamping of the ailing health sector.

The Treasury has in recent years been rolling over foreign debt accumulated under the Jubilee administration by refinancing maturing loans using longer-dated loans that ease the short-term risk of default and prevent a hard hit on the country’s dollar reserves.

Interest payment on the loans will increase to Sh441.4 billion in the year starting July from the current Sh399.9 billion.

But repayments of the principal loans will drop by a bigger margin of Sh215 billion to Sh470 billion, reflecting the reduced need to clear maturing debt.

But the loan repayments will increase to Sh796.8 billion in the year starting July 2020 and Sh861.4 billion at the end of June 2022 when the public will jump to nearly Sh7.17 trillion from the current.

The Jubilee administration has ramped up spending since 2013 to build much-needed new roads, a modern railway, bridges and electricity plants, driving up borrowing to plug the budget deficit.

The increased debt had seen Kenya commit more than half of taxes to paying loans, leaving little cash for projects.

Public debt stood at Sh1.89 trillion in June 2013.