Kenya Treasury Nominee Plans to Shift Debt to Multilateral Loans
Kenya’s nominee for treasury secretary plans to pivot the East African nation’s public debt profile toward multilateral loans and reduce domestic and external commercial liabilities in an effort to lower its debt burden.
Public borrowing will also shift to supporting specific projects rather than general budget support and further enhancing automation and general management at the Kenya Revenue Authority rather than raising tax rates, John Mbadi told lawmakers Saturday during his confirmation hearing.
“My focus is to have commercial debt at no more than 5% of our external debt portfolio, and have 75% of our debt under multilateral debt and only 20% or thereabouts on bilateral debt,” Mbadi said.
Kenya’s external debt profile in 2010 was comprised of 66% multilateral loans and commercial liabilities at 4%. A decade later, about 31% of public debt was commercial and it’s currently at 23%, he said.
Authorities’ attempts to shore up public finances by introducing levies on everything from bread to diapers – meant to raise more than $2 billion and reduce the budget deficit – were abandoned in July after deadly protests.
The anti-government demonstrations also led President William Ruto to dissolve his cabinet and reconstitute it with members of the opposition, including Mbadi. Hearings for several of those nominees are taking place this weekend.
Mbadi’s hearing comes hours after Fitch Ratings late Friday cut its credit rating for the country’s foreign-currency ratings to B- from B, citing fiscal risks after Ruto responded to the protests by withdrawing a bill that would raise taxes.
In July, Moody’s also reduced Kenya’s rating – to Caa1 from B3 – and maintained a negative outlook on the country’s debt, highlighting the nation’s dwindling ability to raise revenue after it scrapped the tax plan.
Mbadi, a 53-year-old accountant, said he also plans to push fo publication of the public debt register annually to boost transparency and accountability.
“In terms of managing debt, the number one priority for me is debt accountability.” Mbadi said. “We must try to make this a statutory document so that every Kenyan must know how much we owe, to whom, and at what cost.”
