EDITORIAL: High public debt pushing Kenya to the precipice

Kenya's fiscal deficit now stands at over eight  per cent. FILE PHOTO | NMG
Kenya's fiscal deficit now stands at over eight per cent. FILE PHOTO | NMG  

As the political dust continues to settle, the full extent of Kenya’s economic troubles appear to be fast emerging.

A number of loosely related issues that have recently emerged should have citizens and politicians, sitting up and paying keen attention.

All relate to our binge borrowing and spending that are partly driven by ambition and not in small part by misuse or wastage of cash by all arms of government.

The first weighty matter is last week’s sovereign downgrade by Moody’s. The agency, just like every observer of the Kenyan economy, has been warning of the high budget deficit and rapid growth of public debt.

By the last count, Kenya had borrowed Sh4.57 trillion that is equivalent to nearly 60 per cent of GDP — which is considered a rather unhealthy level.

To be sure, borrowing is a critical component of growth, but it has a limit. Besides, if you are losing a lot of the borrowed cash to theft and wastage, even the expected internal rate of return may not materialise.

Which brings us to the next issue. Kenya is shortly set to pay a trillion for debt and interest, worrying in itself given our perennial clamour for higher wages, slow growth of tax revenues, little return so far from the debt gobblers like the SGR and populist social funding of education and health.

Our fiscal deficit stands at over eight per cent. Part of the reason we are having trouble with the International Monetary Fund (IMF) and Moody’s is failure to bring it down fast enough to about six per cent. 

The immediate issue — which is really the point of this editorial — is the thunderbolt revelation that IMF suspended the $1.5 billion standby facility that is important in stabilising the shilling in June last year.

The fact that Kenya never drew down the cash says the facility might even have been unnecessary. But what is worrying is the central bank, IMF and the Treasury’s decision to hide information from the public.

That coming shortly after the so-called fraudulent attempt to cash over Sh600 million in Treasury bills and the auditor-general insisting he’s in the dark over Eurobond spending should concern Kenyans.

We are opaquely piling up debt and endangering the future of the country, which must stop.