Kenya’s economic output has more than doubled during President Uhuru Kenyatta’s 10 years in office, but a debt binge that fueled growth and investment could cramp his successor’s ability to tackle growing hunger and soaring prices.
Some 22 million voters will pick a new president, lawmakers and county officials on August 9. The election is being overshadowed by a drought that has left four million people dependent on food aid while Russia’s invasion of Ukraine drives up global grain and fuel prices.
Kenya’s economy is now Africa’s sixth largest, up from 13th when Kenyatta took power in April 2013. Annual growth averaging 3.8 percent over nine years has boosted gross domestic product (GDP) to 11 trillion shillings ($92.6bn) from under 5 trillion.
A close Western ally, East Africa’s most stable country also hosts the regional headquarters of international firms like Alphabet Inc and Visa.
Debt levels have surged, however, to 9 trillion shillings ($75.7bn), or 67 percent of GDP, from just 2 trillion, or 40 percent of GDP, when Kenyatta was elected.
“The increase in debt has been alarmingly fast,” said Robert Shaw, an independent economic policy analyst based in Nairobi.
Kenyatta, who is standing down after serving the constitutional limit of two terms, says borrowing, including $8bn from China, funded much-needed infrastructure and helped spur development.
His government has modernized Kenya’s crumbling, century-old railway network and built more kilometers of paved roads than the previous four administrations combined – over 10,000, Kenyatta told parliament in November.
He also said then that the number of households connected to the electricity grid had tripled to more than eight million.
In 2018, the International Monetary Fund (IMF) classified Kenya as at high risk of debt distress. That risk remains, the IMF’s Kenya head of mission Mary Goodman told journalists last week.
The yield on Kenya’s dollar Eurobond due 2024 hit a record high of 22 percent on July 15, as rising United States interest rates and the Ukraine war make riskier assets less attractive to investors.
But Julius Muia, principal secretary in Kenya’s Ministry of Finance, said debt is sustainable below 70 percent of GDP, adding: “The concern about debt is very misplaced.”
Tabitha Karanja, an opposition United Democratic Alliance candidate for the Senate, said the government’s focus on infrastructure had left many vulnerable people behind.
“You can’t build roads for people who are hungry,” she said.
Kenyatta’s preferred successor, veteran opposition leader Raila Odinga, has pledged to renegotiate terms for the debt to lengthen its maturity and free up cash to fund social interventions and development.
His main opponent, Kenyatta’s estranged Deputy President William Ruto, says he would reduce borrowing and stimulate small enterprises to help drive growth and generate revenues.
But surging living costs, which many Kenyans blame on corruption, are uppermost in voters’ minds.
“Parents with children in school are suffering a lot. Food prices are also hurting them,” said Steve Otiende, a small shop owner in Nairobi.
The government has spent 12.6 billion shillings ($106m) providing food for hunger-stricken communities, but says it needs more.
“The persistent drought has left us with a resource gap of more than 15 billion shillings required for interventions,” said Margaret Kobia, the minister in charge of special programmes.
Investor confidence could be shaken further by the election: two of the last three presidential polls were marred by violence, with 1,200 people killed in post-election clashes in 2007.
“It is very much unclear if the economy has the resilience to manage the coming quarters without crisis,” said Matthew Vogel, a London-based fund manager at FIM Partners, which specializes in frontier markets.