THE International Monetary Fund yesterday said Kenya still has room to borrow despite its debt accounting for 53 per cent of the national wealth by June 30.
Resident representative Armando Morales said the country is still a low distress-risk – low default rate – until its staff do another review next month.
IMF is on record maintaining that Greece’s debt level was sustainable before it sunk into a financial distress and had to be bailed out by the 19-member Eurozone.
“To move to the distress-risk level, you need to move to moderate and high risk and Kenya is way below that. So it is highly unlikely that Kenya will face a situation of distress in the coming years,” Morales said.
Kenya continues to accumulate debt to cover for the Sh570.2 billion deficit in this year’s Sh2.1 trillion budget, an equivalent of 8.7 per cent of the gross domestic product.
The IMF said, the planned budget cuts announced by the National Treasury CS Henry Rotich on October 19, will help the country maintain the deficit within the budget.
Their absence will lead to breach of the deficit due to increased repayments because on higher domestic interest rates and a stronger dollar for the foreign debt.
They will reduce spending or non-productive projects and excesses not consistent with growth strategy, Morales said.
“The government is going through that process and as a result, they will have a budget that is still consistent with the stability and consolidation of the deficit position in the medium term.”
The Jubilee administration has been sharply criticised for increased borrowing amid concerns of misappropriation of funds.Morales maintained the borrowed cash has been spent on intended projects, but emphasised the need for more transparency and accountability to manage public perception.
“Unless somebody identifies some of these development spending that didn’t materialise, which we haven’t seen and haven’t been reported to us, we believe that all the financing including the Eurobond was appropriately spent,” he said.