Article written

  • on 29.08.2013
  • at 11:00 AM
  • by Kevin Hind

Economists sound the alarm over EA’s rising public debt 1

East African Community member states are facing fresh pressure to tame spiralling public debt which has hit new levels.

Fears are now rife that this could hurt growth and make it more expensive for the nations to borrow from the international market, even as Kenya and Tanzania make plans to float sovereign bonds.

Kenya said last week its public debt had surged to $22.3 billion, with the figure likely to hit $23.5 billion by the end of this financial year.

Uganda’s total debt, according to data released last week stands at $6 billion, but is within the country’s ceiling of 35 per cent of GDP. Domestic debt stood at 11 per cent of GDP in 2012/13, against a ceiling of 24 per cent.

In Tanzania, a recent report by the World Bank indicates that public debt has increased from a value equivalent to 30 per cent of GDP in 2008 to a projected value of 45 per cent of GDP by the end of 2012/13.

“While this level of public debt is not excessive, its management requires careful attention,” the 2013 report states.

Economists say East Africa’s growing public debt, while still sustainable, requires careful attention from governments to avert the risk of pushing interest rates higher, as governments gear up for more borrowing to finance various projects.

READ: Look before you leap, sub-Saharan Africa’s subprime borrowers

Tanzania plans to borrow $1.3 billion through external non-concessional loans in the next two fiscal years to finance a number of new projects, while at the same time keeping its debt to a sustainable level of 46.8 per cent of GDP by the end of 2014/15.

The Kenyan data shows commercial banks are the major lenders to government, which carries the risk of crowding out private investment.

More borrowing also means that the taxes of East African citizens are increasingly going towards servicing debts rather than paying for other services.

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By Christine Mungai & Bernard BusuulwaThe East African

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  1. Toby McGuire says:

    Debt is all about putting people out of their miserable lives, your article is pretty interesting.

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