The International Monetary Fund (IMF) has called on the Kenyan government to take substantive steps to reduce the fiscal deficit to address Kenya’s rising public debt.
Adjustment efforts the IMF said in its 2018 Article IV consultation report released on Tuesday should focus on both expenditures and revenues to preserve space for planned growth‑enhancing public investment and key social programs, including the Big Four agenda.
In the same breathe, the IMF said that Kenya’s risk of defaulting on debt repayments has increased from low to moderate.
According to a News report by Reuters, IMF cited the country’s increase in risk to default on the government’s public investment drive and revenue shortfalls in recent years.
“The higher level of debt, together with rising reliance on non-concessional borrowing, have raised fiscal vulnerabilities and increased interest payments on public debt to nearly one fifth of revenue, placing Kenya in the top quartile among its peers”, the IMF said in a report released late on Tuesday.
The 2018 Article IV consultation report pointed out that Kenya’s public debt has risen as revenue shortfalls have not been matched by spending cuts adding that interest rate controls continue to hamper lending especially to small and medium-size enterprises, growth, and monetary policy.
The 2018 Article IV consultation report pointed out that IMF welcomed the government’s planned revenue measures but emphasized the need for additional steps to meet the deficit targets for both 2017/18 and 2018/19 financial years.
The lender stressed on the importance of realistic revenue projections to increase fiscal transparency and to avoid ad hoc cuts in public investment and other high‑priority expenditures.
The report from IMF comes even as Absa’s Africa Financial Market Index ranked Kenya third on the list of Africa’s highest ranked financial markets in the 2018 index.
The index which is in its second year is a premier indicator of the attractiveness of Africa’s financial markets, for use by governments, investors and asset managers around the world.
“The second edition of the Absa Africa Financial Markets Index draws attention to the considerable investment opportunities and untapped market potential of countries across the continent,” said Akinwumi Adesina, President of the African Development Bank, in a foreword to the report.