Editorials

Spend bond cash prudently

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Treasury building in Nairobi. FILE PHOTO | NMG

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Summary

  • Proceeds of the upcoming Sh150 billion bond, the biggest single borrowing from the domestic market, should be spent prudently to ensure it does not hurt the country's debt sustainability.
  • The government says the money will be used to pay contractors and finance completion of ongoing road projects.
  • It is expected that Sh100 billion will be used to clear pending bills, boosting businesses that supply the government with various goods and services.

Proceeds of the upcoming Sh150 billion bond, the biggest single borrowing from the domestic market, should be spent prudently to ensure it does not hurt the country's debt sustainability.

The government says the money will be used to pay contractors and finance completion of ongoing road projects.

It is expected that Sh100 billion will be used to clear pending bills, boosting businesses that supply the government with various goods and services.

This is a good move since delayed payments and even default has been cited as one of the biggest risks of doing business with the government.

The State is the biggest player in the economy and should use its outsize role for the common good, starting by settling legitimate claims promptly.

More importantly, the mega bond should be within the domestic borrowing target that the Treasury had announced earlier in the budget for the current fiscal year.

This will ensure fiscal discipline, reining in the borrowing appetite that could land the country into a debt crisis if left unchecked.

The government has defended its ever-rising borrowing but nobody knows when we will have reached the edge of the cliff.

Another reason for limiting State borrowing from the domestic market is to avoid the risk of crowding out the private sector.