Ethiopian Business Review

Economists sound the alarm over East Africa’s rising public debt

East African Community member states are facing fresh pressure to tame spiraling public debt which has hit new levels. Fears are now rife that this could hurt growth and make it more expensive for the nations to borrow from the international market, even as Kenya and Tanzania make plans to float sovereign bonds.

Kenya said in the last week of August its public debt had surged to USD22.3 billion, with the figure likely to hit USD23.5 billion by the end of this financial year. Uganda’s total debt, according to data released by the end of august stands at USD6 billion, but is within the country’s ceiling of 35Pct of GDP. Domestic debt stood at 11Pct of GDP in 2012/13, against a ceiling of 24Pct.

In Tanzania, a recent report by the World Bank indicates that public debt has increased from a value equivalent to 30Pct of GDP in 2008 to a projected value of 45Pct of GDP by the end of 2012/13. “While this level of public debt is not excessive, its management requires careful attention,” the 2013 report states.

Economists say East Africa’s growing public debt, while still sustainable, requires careful attention from governments to avert the risk of pushing interest rates higher, as governments gear up for more borrowing to finance various projects. (The East African)

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