CBK defends high borrowing

Published on 12/06/2009

NAIROBI, Thursday

Central Bank of Kenya Governor Njuguna Ndung’u has defended increased Government domestic borrowing saying it is aimed at stimulating economic growth and will not choke lending to the private sector. Ndung’u said money borrowed locally will be spent on public projects, such as infrastructure, and that will boost the overall economy. “These projects even when fi-nanced from domestic borrowing do not crowd out the private sector, they crown in, they create complementary avenues to private investments and actually enhance the profitability of the private investments,” Ndung’u said in an email. He added domestic credit to the private sector has remained at around 80 per cent and he did not expect this to change significantly. Finance Minister Uhuru Kenyatta unveiled an Sh866 billion spending plan on Thursday for the fiscal year starting in July.

Future Growth

Kenya has budgeted Sh54.5 billion from domestic borrowing in the current fiscal year, which includes Sh18.5 billion worth infrastructure bonds issued earlier this year. It put on hold a eurobond issue for Sh33.6 billion because of the global eco-nomic crisis and after a post-election crisis lowered its credit ratings. “The development crises that Africa faces, and Kenya in particular, requires more outlay of public investment need to be considered as stimulus to future growth. That should be the concern now, to revive the economy,” Ndung’u said.

The Government’s gross domestic debt stood at Sh478.2 billion in February.


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