The Institute of Public Finance (IPF) has warned that Kenya continues to be at high risk of debt distress.
IPF in its Macro Fiscal Analysis Snapshot (MFAS) for 2025 contends that this is despite the country’s sell-off of itsUS$2 billion (approximately Sh258 billion) Eurobond last year.
Its senior research analyst asserted that the country has breached all of the International Monetary Fund’s (IMF) debt sustainability ratios. This includes three parameters set by the Bretton Woods organization including debt-to-GDP, debt service-to-revenue as well as external debt service-to-exports.
“As we speak, Kenya has breached all these parameters set by the IMF. Any shocks on the economy could have far-reaching effects that hamper economic growth,” he said.
IPF further states that further shocks that reduce growth or increase borrowing risk putting significant pressure on the limited fiscal buffers.
The organization called on the government to employ more fiscal restraint including scaling down on borrowing to reduce borrowing and taxation.
According to IPF, these measures will result in the re-building of both fiscal buffers and foreign exchange reserves which hitherto have not recovered.
His sentiments come on the back of Treasury’s Budget Policy Statement for the fiscal year 2025/26 to 2027/28 which continues to draw sharp focus from stakeholders.
Earlier, economist Ashish Chadda faulted Treasury’s 2025 budget proposal, calling on the government to review the Draft.
Chadda, in a letter addressed to Treasury Cabinet Secretary John Mbadi, poked holes in the proposal over the projected increase in government expenditure, which is expected to rise by over Sh1 trillion from 2023 to 2026.
He pointed to the fiscal framework proposed through the Budget Policy Statement, which outlined a significant increase in both revenue and expenses.
While additional revenues are expected to come from new tax measures, Chadda cautioned that this could hurt the economy, particularly for already burdened taxpayers.
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