Kenya debt distress? Patrick Njoroge discusses country’s fiscal policy
The question of whether Kenya is borrowing too much and for the right purposes has been subject to debate more often than not. To discuss the country's fiscal policy, Governor of Kenyan Central Bank (KCB), Patrick Njoroge joins CNBC Africa's Arnold Kwizera for more.
Thu, 01 Aug 2019 10:16:38 GMT
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AI Generated Summary
- The impact of rising debt levels on Africa's economies and the need for cautious fiscal management were discussed at the forum.
- Njoroge emphasized the importance of learning from Rwanda's successful infrastructure investments to avoid unsustainable debt levels in Kenya.
- The distinction between 'good' and 'bad' debt was highlighted, emphasizing the necessity of using borrowed funds effectively for economic growth.
Kenya's Central Bank injected dollars into the foreign exchange market to stabilize the currency after the Kenyan shilling dropped against the dollar. The shilling, one of Africa's top performers, faced pressure due to political risks and a stronger dollar. Meanwhile, Ethiopia passed a bill to open up its financial sector to foreign citizens to boost foreign exchange reserves.
The Governor of the Kenyan Central Bank (KCB), Patrick Njoroge, recently discussed the country's fiscal policy at a forum focusing on sovereign debt dynamics and implications for monetary and financial stability in Africa. The concern over rising debt levels, particularly commercial borrowing, as opposed to concessional borrowing, highlighted the need for cautious fiscal management.
Njoroge emphasized the importance of learning from Rwanda's successful infrastructure investments without substantial increases in debt levels. Kenya, with a debt-to-GDP ratio of 56%, needs to prioritize investments that spur economic growth and benefit the private sector. The discussion also delved into growing domestic capital markets and the pros and cons of domestic versus external sources of financing.
When asked about the distinction between 'good' and 'bad' debt, Njoroge stressed that all debt must be repaid, regardless of the outcomes. Whether debt leads to tangible benefits for the economy or not, it remains a financial liability that requires resource allocation for repayment.
While considering the interest rates, maturity terms, currency, and grace periods of loans, Njoroge highlighted the importance of utilizing borrowed funds effectively to drive economic vibrancy and avoid burdening future generations with unsustainable debt.