Debt overhang threatens Kenya’s infrastructure plans

Subject

Kenya's debt difficulties.

Significance

Central Bank Governor Patrick Njoroge recently called for reorganising Kenya’s public debt and exploring alternative approaches to fund fiscal deficits. Increased infrastructure spending over recent years has contributed to a steep rise in debt, causing recurrent spending to increase faster than the development budget this debt is supposed to finance.

Impacts

• Rising commercial external debt will put increasing pressure on the country’s exchange rate and foreign reserves.
• Institutional weaknesses may threaten the current appeal to restrict overdependence on debt.
• Corruption scandals may slow or even stall some development projects.