Kenya’s economy size: Kenya has revised up the size of the economy in 2017 by almost half a trillion in a move that is likely to allow the government more borrowing space.
This is the third consecutive year that the debt to GDP figures are being revised.
This latest revision comes as the current debt to Gross Domestic Product (GDP) ratio borders close to the danger zone.
GDP – the sum of goods and services produced in the economy last year, was revised upwards by Sh. 447 billion to stand at Sh. 8.2 trillion, up from the earlier estimate of Sh. 7.7 trillion. Kenya’s debt at Sh. 5.1 trillion to GDP in nominal terms now drops by two percentage points to 62 per cent from the initial 64 per cent. Debt-to-GDP is a key indicator of debt sustainability.
The National Treasury puts the country’s debt-to-GDP ratio in 2017 at 49 per cent, a ratio it insists is stable as it is below the recommended threshold of 74 per cent of GDP in net present terms.
According to KNBS, the decision to review the nominal GDP came after they interrogated the national accounts data. Much of the change was occasioned by changes in the compilation of data on prices of “particular food crops.”
“The current revision was mainly informed by notable changes in the data that was used in the compilation especially those to do with prices of particular food crops that considerably led to an underestimation of the output of growing of crops,” said KNBS.
KNBS said the revision mainly affected data for 2017 and was more pronounced in the GDP at current prices, as opposed to the volume of goods and services produced during the period.
Earlier this year, the National Treasury wanted a change to the Public Finance Management Act to lower Kenya’s percentage of debt to GDP from 49 per cent to 25 per cent. This would effectively offer the Government more room for borrowing.
“We are asking for an amendment of the PFM Act to classify only external public guarantee debt to be considered as the ceiling for the purposes of the World Bank Country Policy and Institutional Assessment,” Treasury PS Kamau Thugge said.
Dr. Thugge said Kenya’s current total debt to GDP stands at 49 per cent, which is still short of the World Bank’s recommendation of 74 per cent, the level at which it considers debt to be risky.