The Treasury’s borrowing plan for the next two years will see Kenya pile on the equivalent of Sh2.5 billion daily in new debt, an indication of how much the taxpayer is struggling to finance the exchequer.
The implications of Kenya’s rapid accumulation of debt are stark. The rising repayments are draining the public purse and forcing higher taxes upon the already stretched taxpayer.
This is why borrowed funds need to be treated with prudence and invested only in productive ventures that will in turn generate revenue that will partly service the debt.
Borrowing in itself is not a bad thing. It helps the country build its infrastructure that is critical for generating jobs and growing the economy.
It becomes a problem only when the monies borrowed are put in ventures that do not generate revenue, or create jobs.
In Kenya’s case, we have seen expensive projects that have gobbled up hundreds of billions of shillings in borrowed funds struggle to break even.
The Treasury is increasingly being forced to borrow afresh just to repay due debt, often at higher rates than the original.
We therefore call on the Treasury to exercise greater discipline in the allocation of borrowed funds.
The Sh1.87 trillion in new loans that the taxpayer will be burdened with in the next two years must be accounted for.
This money must be invested in productive sectors or ventures, and those that create the largest number of jobs.
The Treasury must also address the expenditure problems that have seen the deficit between the country’s revenue and budget outlay (fiscal deficit) widen further each passing year.
Every year, the Treasury sets out an ambitious plan to cut unnecessary expenditure. But it invariably ends up failing to meet these goals and borrows even more to cover the widening deficit.
Given the prevailing circumstances that have made it hard for the taxman to grow revenue—indeed the Treasury is revising revenue projections downwards—it only makes sense to cut out outlay as well.
These spending cuts must target the recurrent vote, meaning that the country must now start to live within its means.