IMF loan a bitter pill for Kenya’s ailing economy
What you need to know:
- An extension of the line from Nairobi to Naivasha was completed last year at another cost of Sh150 billion.
- However, SGR is perennially making losses, meaning that rather than pay for itself, taxpayers have to pay the loan.
Kenya is at a crossroads as the economy tanks, forcing the government to seek intervention of lenders such as the International Monetary Fund for cash bail-out. This is a path the country has walked before; it is fraught with perils and the better if it is avoided.
Loans from IMF come with stringent conditions that end up precipitating worse social and economic challenges. Which is what happened to Kenya in the late 1980s and 1990s. But the situation seems dire and the chickens have come home to roost.
The prevailing situation is attributed to a combination of factors, including uncontrolled budgetary expansion driven by huge infrastructural projects funded through heavy borrowing.
Added to this is the fact that the borrowed cash is wasted or simply stolen, meaning taxpayers never get value from the loans that keep rising.
Too much money is also spent on bloated workforce at the national and county governments and dysfunctional parastatals. Covid-19 that has sunk world economies has only made a bad situation worse.
Sh270 billion loan
A review of some of the decisions made in recent years explain why we are in a hole. In 2014, the government obtained a total of Sh270 billion loan through Eurobond, but the money has never been properly accounted for.
The government also built the Standard Gauge Railway from Mombasa to Nairobi that was completed in 2017 at a cost of Sh327 billion.
An extension of the line from Nairobi to Naivasha was completed last year at another cost of Sh150 billion. However, SGR is perennially making losses, meaning that rather than pay for itself, taxpayers have to pay the loan. Lately, the country has been grappling with loss of billions through phantom dam projects.
Going back for another IMF loan is a bitter pill and a claw-back to steps to free ourselves from the yoke of Bretton Woods lenders. Kenya’s recourse rests on proper economic planning, stringent expenditures and curbing theft of public resources.
