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Kenya’s Public Debt Review 2023: Is Kenya’s Public Debt Level Sustainable?

Apr 16, 2023

Debt sustainability has been a critical issue in the Sub-Saharan Africa region as several countries are facing high risk of debt distress. We have seen countries such as Zambia and Ghana having to restructure their debt to avoid a complete default on their loans. Similarly, concerns remain high on Kenya’s debt sustainability as a result of the continued rise in country’s debt levels with institutions such as World Bank and the International Monetary Fund (IMF) stressing on the need for Kenya to focus on fiscal consolidation. As of December 2022, total public debt stood at Kshs 9.1 tn translating to a debt to GDP ratio of 63.0%, 13.0% points above IMF’s recommended threshold of 50.0% for developing countries. Additionally, debt service to revenue ratio stood at 47.9%, 17.9% points above IMF’s recommended threshold of 30.0%, highlighting how much public debt servicing weighs on the country’s expenditure. Most of the external debt is denominated in USD at...

Kenya Retirement Benefits Scheme FY'2022 Review

Apr 9, 2023

The Pension industry in Kenya has been negatively impacted by the various unprecedented economic occurrences such as the slow rebound of the financial markets after the adverse effects of COVID-19 as well as uncertainties around the general elections which slowed down economic activities in the country. Additionally, the high cost of living occasioned by elevated fuel and food prices as a result of sustained supply constraints have weighed down on the adequacy of disposable income available for saving for retirement as well as the sustainability of the pension industry in Kenya. This is evidenced by the Assets under Management (AUM) growing at a slower rate of 1.2% to Kshs 1.6 tn in 2022, from Kshs 1.5 tn in 2021, compared to 10.6% growth witnessed in 2021 to Kshs 1.5 tn from Kshs 1.4 tn. Further, Kenya is characterized by low saving culture with the Kenya National Bureau of Statistics (KNBS) in the

Privatization of State Enterprises

Mar 26, 2023

Privatization generally refers to transfer of ownership of an entity or a corporation from public to private sector. Privatization typically aims at enhancing economic efficiency by improving a company’s performance, cease or reduce the need for government economic intervention. Further, privatizations have been used to induce competition in monopolized sectors. Globally, one of the notable privatization of State Owned Enterprises (SOEs) was British Airways in 1987 when it was listed on the London Stock Exchange. Closer home in developing nations such as Kenya, State Owned Enterprises have been touted as major contributors to the nations expenditure and public debt, given that whenever these companies borrow, the state guarantees the debt. As at the end of FY’2021/22, publicly guaranteed debt by SOEs stood at Kshs 145.4 bn, a 7.5% decline from Kshs 157.2 bn in FY’2020/21. To put this in perspective, the current regime targets to redu...

Nairobi Metropolitan Area Commercial Office Report 2023

Mar 19, 2023

In 2022, we published the Nairobi Metropolitan Area Commercial Office Report 2022 themed ‘Changing Working Patterns Driving the Market’, in which we highlighted the performance of the sector in 2021, as well as giving insights on the outlook and areas best fit for investment opportunities. According to the report, the sector witnessed improved performance, with the average rental yields coming in at 7.3% in 2021, 0.3% points higher than the 7.0% recorded in 2020, attributed to continued COVID-19 pandemic recovery, an improved business environment and expansion in activities by various firms. The average occupancy rates slightly reclined by 0.1% points to 77.6% in 2021, from 77.7% recorded in 2020, this is as some firms still embraced a work from home policy. Asking rents and prices stabilized to an average of Kshs 94 and Kshs 12,108 per SQFT respectively in 2021, from Kshs 93 and Kshs 12,280 p...

Kenya Economic Update: 2023

Mar 12, 2023

On 24th February 2023, S&P Global downgraded Kenya’s credit outlook to negative from stable and followed a downgrade of the Long Term Foreign Currency issuer default ratings by Fitch Ratings on 14th December 2022. This comes at a time when the country is struggling with its liquidity position as a result of high debt service obligations and as a result, being at high risk of debt distress. Kenya is also facing elevated inflationary pressures with inflation having increased to 9.2% in February 2023 from 9.0% in January 2023 mainly driven by high food and fuel prices. Kenya’s inflation has remained above the Central Bank of Kenya’s target range of 2.5%-7.5% with the 2022 average coming in at 7.6% reflecting the increased cos...