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JUBILEE GOVERNMENT ON THE SPOT OVER HEAVY BORROWING

 

Government on the spot over heavy borrowing

Government on the spot over heavy borrowing

By Winnie Kabintie

President Uhuru Kenyatta’s government borrowed a total of Sh 226.78 billion (sh 843m per day) between January and July 2016 (212 days), stretching an already huge public debt, which stands at Sh 3.2 trillion.

Opposition leader Raila Odinga has criticized the heavy borrowing by the government and has given Uhuru a 5-point demand over the borrowing spree, which he terms as “weird and pedestrian”.

“Jubilee is pursuing a weird and pedestrian policy where the deeper we have gotten into debt, the ore we have borrowed. Increasing public borrowing has resulted in fiscal consequences,” said Raila Odinga.

Raila wants Uhuru to make a full disclosure of the amounts borrowed, sources of the funds and the repayment amount in terms of capital and interest from January 2013 to date. He has also demanded that Uhuru convenes a national public debt conference to come up with ways of controlling the issue.

Mr. Odinga also wants president Uhuru to disclose in details the projects that have been financed by the borrowing by giving information such as location, cost and time of completion. Additionally, Raila is also demanding a reevaluation of the government’s priority on infrastructural projects and wants borrowing halted until an evaluation of the benefits accruing out of the current loans is done, warning that if the trend carries own, five years down the line Kenya will be spending all taxes collected in repaying public debts.

Majority leader Adan Duale has maintained that the money has been used for development projects that will benefit Kenyans.

“I can assure you that all these loans borrowed by the government have gone into offering real benefits to the people of Kenya,” Duale said.

Government’s heavy borrowing hurting the economy

Even prior to the current Sh 226.78 billion debt that the government has accrued for the last seven months, experts had warned that the ballooning public debt is unsustainable. 

In November last year, the National Treasury borrowed Sh60 billion from banks to fund undisclosed infrastructure projects just months after floating a bond in Europe to pay off a similar loan amid mounting pressure on the government to explain how it spend Sh250 billion raised form the Eurobond.

High domestic borrowing for the last financial year saw bank interest rates soar to the expense of citizens and even with the capped interest rates, it’s unlikely that the government will cut down on domestic borrowing, at least by any meaningful mark.

Since the jubilee government assumed office in 2013, the government has been on a borrowing spree that has seen the Sh 1.8 trillion public debt inherited from the grand coalition government rise by 78% to stand at sh 3.3 trillion with Foreign loans funding major infrastructure projects.

The new debt includes a Sh 60 billion loan to ease the cost of doing business extended by the china development bank and a Sh 20 billion loan taken to save the troubled Kenya Airways.

Runaway Corruption

huge public debt bad for economy Image courtesy

huge public debt bad for economy
Image courtesy

There has also been major corruption in President Uhuru’s administration with scandals such as the NYS and the Eurobond and some analysts reckon that a good fraction of the monies being borrowed is possibly being looted to finance the 2017 general elections, which political observers have touted to be the most competitive, intense and expensive in Kenya’s history of multi-party politics.

According to an opinion article by a public policy and economic analyst Mr. Shaw, which was published in the daily nation, on October 18th, “To explain extravagant 2017 poll campaign, just follow the money”.

“While one cannot give definitive figures, one should look in the direction of the money lost or unaccounted for through the likes of the mega NYS  stable of scams and overpriced schemes such as the single gauge railway, When added up, there is a stack of money out there paid out to or borrowed for these scams and overpriced projects,” Mr Shaw says in the article.

Overpriced projects

Kenya’s Sh327 billion Standard Gauge Railway (SGR), currently under construction, is one of the infrastructure projects by the jubilee government, which is said to be overpriced.

According to the Economist, the SGR could only have cost Sh 16 billion if Kenya had opted to upgrade the old railway into an SGR consequently saving taxpayers a whopping Sh311 billion; enough cash to fund all the 47 counties.

In addition, compare Ethiopia’s Sh. 300 billion 756km electric rail, which is set to cut across its capital Addis Ababa all the way to the Red Sea state of Djibouti to Kenya’s Sh. 327 billion 427 km SGR.

Neighbouring country Tanzania also secured a Sh a $7.6 billion loan from China’s Export-Import Bank (Exim) for the construction of a railway line that will link it with Burundi, Rwanda and the Democratic Republic of Congo.

Tanzania’s 2,190km SGR is four times longer than Kenya’s but only twice as costly although the government has argued that the design adopted made increased the cost.

“We have built bridges, and raised the track in areas where we would have had corners to achieve the average speed we expect the wagons to travel at. This has increased the costs immensely as compared with the neighbouring Ethiopia and Tanzania SGER designs that haven’t taken this into account,” Kenya Railways managing director Atanas Maina said in a previous interview.

 

 

 

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