What you need to know:
- The debt is more than twice the country’s annual budget, which is approximately Sh3 trillion at the moment.
- Matters are bound to be bad in the coming years, given the impact of the Covid-19 pandemic on the economy.
The rate at which Kenya’s debt portfolio has been growing is a matter of grave concern. In the past seven years, the national debt burden has grown more than three times.
Figures by the Central Bank of Kenya show that in 2013 the country had a debt of Sh1.8 trillion but this has risen to Sh6.6 trillion. The debt is more than twice the country’s annual budget, which is approximately Sh3 trillion at the moment.
A new international report that ranks countries on the basis of prosperity presents a grim scenario: Kenya is headed towards financial unsustainability due to the public debt.
Borrowing is an established means of generating incomes to manage expenditures. However, challenges abound when the borrowing spikes beyond ability to pay back.
What happens with government borrowing is that mature loans have to be prioritised. That means the government has to first pay out debts from revenues it generates before doing anything else. Consequently, this crowds out cash for capital development and other needs.
In many instances, the government is forced to borrow more to meet its needs, therefore creating a vicious cycle.
Matters are bound to be bad in the coming years, given the impact of the Covid-19 pandemic on the economy since the beginning of the year. In the first place, the government is losing incomes due to measures introduced to cushion the citizens from the ravages of the pandemic.
Tax waivers and job cuts means depressed revenues for the government. Moreover, available resources have been committed to fighting the pandemic and mitigating its depredations.
All these diminish the government’s ability to clear accumulated debts. Interest rates then spiral and the pain increases.
A major drawback is that huge chunks of the borrowed funds are never put into good use. Misappropriation, wastage and sheer theft are prevalent in government. This creates a harsh paradox, where citizens are made to pay for money they never benefit from.
The government has to institute stringent measures to contain expenditure, curb pilferage and tame its appetite for debt.