Stop Kenya's new World Bank, IMF loans binge

Kenya’s insatiable appetite for World Bank and International Monetary Fund (IMF) loans is worrying.

The World Bank’s total lending rose by Sh517 billion from June 2019 to Sh1.125 trillion in December, with the bulk loans going into recurrent expenditure -- pay for wages, salaries and debt. This is certain to push the country deeper into financial problems.

The debt servicing obligations are continuously driving expenditures even as the Kenya Revenue Authority (KRA) seeks to grow its yearly collections.

This means that Kenyans will remain overtaxed so that the country meets its loan repayment obligations.

It also means that it will be hard for the Uhuru Kenyatta government to lower taxes because it needs more billions of shillings to repay the loans.

It is time to break this cycle. Let Kenya cut its expenditure drastically and have realistic budgets, especially if the money is not for development purposes.

Also, if Kenya would limit its expenses and utilise better what it has, it would help reduce cases of corruption. Most times, these loans act to replenish the feeding trough for politicians and government officials and encourage wastage and theft.

Yes, Kenya needed some of this money to cushion itself from the deteriorating cash flow situation, marked by falling revenues, worsening debt service obligations, and the effects of the Covid-19 pandemic.

But now that the pandemic is receding, the government must adopt prudent fiscal policies.

Under the administration of former President Mwai Kibaki, Kenya kept away from such kind of credit, with most of the monies from institutions like the IMF and the World Bank coming in the form of project support. Yet Kenya’s economy did not suffer.

Some would argue that the deficits and debt are not necessarily a threat so long as they do not strain the economy. But this borrowing trend is unsustainable and in the coming years, the loans will even be more expensive.