President Uhuru Kenyatta was Wednesday bullish about his administration’s appetite for debt, saying it is good for the country’s development.
The President’s defence of the country’s borrowing came just a day after National Treasury Cabinet Secretary Ukur Yatani formally presented to Parliament a legal notice proposing to expand the country’s debt ceiling to Sh10 trillion.
The legal notice, which requires the approval of the National Assembly and the Senate, seeks to amend the Public Finance Management (National Government) Regulations of 2015 to increase the debt ceiling from the current Sh9 trillion.
“I want to pose a national question: How much is too much borrowing? When does borrowing become too much and unbearable to a nation?” President Kenyatta asked.
‘Cabal of looters’
The President said that the only time the debt is a burden to a nation is if the nation is led by a “cabal of looters.”
“But in the hands of a visionary administration, debt is a catalyst for rapid development,” the President said. He added that the question Kenyans need to ask themselves is not whether debt is good or bad, but whether the money ends up in private pockets or is used to accelerate economic development.
“To maintain the tempo of our accelerated achievements, the fifth administration should not shy away from using other people’s money. Debt in a cleaned up government is an enabler, not a burden,” said the President.
By the time President Kenyatta’s regime came to power in 2013, the country’s debt stock stood at Sh1.8 trillion. After massive borrowing from the local, multilateral and bilateral markets, the country’s public debt has grown exponentially to hit Sh8.6 trillion.
With a Sh3.33 trillion budget for the 2022/23 financial year that has a deficit of Sh846 billion, according to Mr Yattani, the government was left with no choice but to expand the debt ceiling.
Money put to good use
The President said that the borrowed money was put to good use, like closing “our infrastructure gap and to connect markets”.
“If it took a maize trader three days to travel from Kitale to the border of South Sudan, what we borrowed has ensured that it now takes him just five hours. Similarly, today, any trader can travel on tarmac road to four out of five of our neighbouring countries in record time,” he said. President Kenyatta reminded those against his administration’s borrowing that when South Korea achieved its economic “miracle” in a record 25 years, it also achieved the rank of being the fourth most indebted country in the world.
“But they did not call it debt, they called it using other people’s money to advance their course,” the President said. The Head of State also said Britain “used other people’s money” to industrialise in the 1900s and that it only finished repaying “this debt” in 2015.
The President’s lecture on the need to borrow did not stop there.
But even as the President defended the government’s borrowing, the Bretton Woods institutions have previously warned that a pileup of loans may lead to debt distress.