Public debt is a public finance terminology that is used to refer to the amount of money owed by a government or state to lenders. Lenders could either be private lenders or foreign lenders. Public debt is also known as government debt or national debt.
When the government owes the debt to lenders who are from foreign countries, it is referred to as external debt while if the lenders are from within the country, the debt is called internal debt. The public debt can also be classified as long-term or short-term depending on the repayment period.
Despite the government’s borrowing being a major booster for development, the government debt if too huge leads to a government budget deficit every financial year.
Despite a government taking big loans from both internal and external lenders, it is always the responsibility of the citizens in the majority of the countries to repay the loan through various means including taxation.
Public Debt in Kenya
Up to the year 2021, Kenya's cumulative public debt stands at Sh7.7 Trillion. If this loan is to be paid in cash by all the 47 million Kenyan citizens, each person could pay a total of Sh150 thousand.
Benefits and Problems of Public Debts
The main advantage of the loans that the government takes from lenders within the country or foreign countries is that the money largely contributes to the development projects in the country. These projects help in growing and expanding different sectors of a country's economy such as the transport sector, education sector, industries, and other economic infrastructure. Government borrowing also largely contributes to expanding a country's GDP and helps open up the country.
However, huge public debts have so many disadvantages to the borrowing country. The major problem of government debts is very huge interest rates. The interest rates drag the country's economy behind. If the money borrowed is poorly invested, the country ends up making losses during the repayment of the debts.
Comparisons Between Kenya and Other East Africa Countries
The public debt is always rated as per the GDP of the country. According to the International Monetary Fund (IMF), a country is not supposed to borrow beyond 40 percent of a country's GDP. However, in Kenya, the Sh7.7 trillion debt is equivalent to 70 percent of Kenya's Gross Domestic Product.
In East Africa, Kenya is the leading country with the largest public debt compared to the other countries. Both Rwanda and Burundi have a public debt of 69%. Uganda which is one of Kenya's neighboring country has a public debt of 51%. Tanzania on the other hand has a public debt of 39 percent in relation to its Gross Domestic Product. South Sudan as of now has a national debt of 46.97%. In Ethiopia, the government debt stands at 59%.
However, there are other African countries with very huge public debts that are beyond 100%. A good example is Zambia which has 120% public debt while in Angola the debt stands at 108%. In Ghana and Mozambique, the public debts are 75% and 24% respectively.
Content created and supplied by: Description (via Opera News )
Opera News is a free to use platform and the views and opinions expressed herein are solely those of the author and do not represent, reflect or express the views of Opera News. Any/all written content and images displayed are provided by the blogger/author, appear herein as submitted by the blogger/author and are unedited by Opera News. Opera News does not consent to nor does it condone the posting of any content that violates the rights (including the copyrights) of any third party, nor content that may malign, inter alia, any religion, ethnic group, organization, gender, company, or individual. Opera News furthermore does not condone the use of our platform for the purposes encouraging/endorsing hate speech, violation of human rights and/or utterances of a defamatory nature. If the content contained herein violates any of your rights, including those of copyright, and/or violates any the above mentioned factors, you are requested to immediately notify us using via the following email address operanews-external(at)opera.com and/or report the article using the available reporting functionality built into our Platform See More