Tame ballooning national debt or perish

It is alleged that Kenya borrowed more than Sh450 billion from China to fund the SGR, which remains a web of intrigues.

Photo credit: File | Nation Media Group

What you need to know:

  • Statistics from the Central Bank of Kenya indicate that the public debt stood at Sh6.649 trillion as at end of May.
  • Kenya’s creditors include multilateral lenders like the World Bank, IMF, African Development Bank and China.

The latest Parliamentary Budget Office (PBO) report on the country’s exponential public indebtedness leaves a lot to be desired. It puts the national debt at Sh7.5 trillion by June 2021, up from Sh6.6 trillion at the same time this year. Worryingly, the report further projects that by 2022, when President Kenyatta is expected to conclude his second and final term, the debt could hit Sh9.2 trillion.

Whereas the PBO attributes the increase to the impact on generation of domestic revenue by the Covid-19 pandemic, the truth is that, the government’s insatiable appetite for loans is to blame.  Since the Jubilee administration assumed power, it has been on a borrowing spree.

Statistics from the Central Bank of Kenya indicate that the public debt stood at Sh6.649 trillion as at end of May, where Sh3.496 trillion and Sh3.153 trillion were from external and domestic debt, respectively. In April, the debt was Sh6.436 trillion; hence, an increase of Sh179.1 billion and Sh33.7 billion to the external and domestic loans, respectively.

Kenya’s creditors include multilateral lenders like the World Bank, IMF, African Development Bank and China.

The coronavirus pandemic, coupled with unabated borrowing, has thrown the country’s public debt into disarray, hence economic recession and depression akin to The Great Depression of yesteryear.

Needless to mention, it alleged that Kenya borrowed more than Sh450 billion from China to fund the SGR, which remains a web of intrigues. The country’s Eurobond debut, which is said to have generated more than $2 billion (Sh200 billion) following its over-subscription, has produced more heat than light.

For the umpteenth time, the National Treasury has assured Kenyans that the loans are sustainable, even as the debt-to-GDP ratio surpassed the 50 per cent mark and the debt servicing expenditure is estimated to consume up to 49 per cent of ordinary revenue in the 2020/2021 financial year. 

Evidently, the shilling has been performing dismally against the dollar and other international currencies. Its precipitous fall is attributed to the heavy borrowing and a fiscal deficit in the balance of trade.

Unfortunately, poor countries, including Kenya, are extravagant and wasteful, even at the cost of burdensome debt. Worse, still, financial mismanagement, ‘white elephant’ projects and graft have led to a sky-rocketing of the public debt, which has become a millstone around their neck.

Public financial resources must be managed prudently and transparently lest the “Big Four Agenda”, Kenya Vision 2030 and the SDGs become a mirage.


Joseph G. Muthama, lecturer and author, Kiambu