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IMF warns about rising public debt in the country

The International Monetary Fund (IMF) Resident Representative in Kenya Jan Mikkelsen, has warned Kenya about its rising debt.

He said the debt must be contained to steer clear of vulnerabilities to the economy from unexpected shocks.

The representative said that even though the economy has shown resilience to drought and prolonged electioneering this year, the rising debt is still a huge concern.

He expressed his concern that if the rising public debt is left unchecked could drag down the economy in the future.

The country’s debt has been on the rise in the past recent years and is currently at Sh4.4 trillion by the end of September from less than a trillion shillings in mid-2014.

Mikkelsen said the nation needs clear policies to tackle “debt vulnerability”, which could increase more if Treasury pursues another syndicated loan and a second Eurobond as pointed out by Treasury Secretary Henry Rotich two weeks ago.

“The financial discrepancy needs to be reduced a little bit to make additional room for the private sector and also to cut the public debt pressure,” he told the media on the sidelines of an event hosted at Strathmore Business School, Nairobi.

“We still do see expansion in the Kenyan economy, which is fairly resilient. It will of course assume that political stability returns to the nation.”

A Budget Review and Outlook Paper released in September illustrated that the level of public debt to GDP ratio was projected to go up to 59.0 per cent this financial year, from a preceding target of 51.8 per cent.

The financial shortage was at 7.9 per cent from a earlier forecast of 6.2 per cent.

The official said an IMF mission would visit Nairobi in mid-December to appraise its programmes with the government.

The global lender has a stand-by credit facility worth $1.5 billion with Nairobi that the Kenya government can draw from in case of important exterior shocks.

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