An Evaluation of the Structure and Servicing of Kenya’s Public Debt

Abstract

The aim of this study was to determine the structure and servicing of Kenya's public debt; whether an association existed between internal and external government debt; and the ability of Kenya Government to service its debt. The study used secondary data from documents of the Kenya Government and the Central Bank of Kenya and the data collected was analyzed using trend series and financial ratios adapted from debt and debt servicing indicators used by the World Bank and the Maastricht Treaty of the European Union. The major conclusions reached are set out below. (a) More than 50 percent of Kenya's public debt was on concesional terms and the fact that a larger proportion of debt servicing went to service domestic public debt is an indication that public debt in Kenya had been poorly managed. (b) Levels of external public debt were positively associated with levels of e domestic public debt servicing. (c) Over the last twenty years of the study period, Kenya was severely indebted and was therefore not able to service her public debt without resorting to rollovers of domestic public debt at higher interest rates. The study recommended that the Kenya Government should take measures to stimulate productivity, improve revenue collection, restructure its debt and, institute a sound public debt management strategy. The study also called upon the developed countries to open up their markets to Kenyan goods.