Even as financial experts continue to caution against the government’s heavy borrowing, president Uhuru Kenyatta has maintained that Kenya’s public debt is manageable.
Uhuru, who was speaking during an interview with CNN’s Richard Quest, further said that China was just one of the lenders to Kenya including world bank and he doesn’t understand why debt critics only focus Kenya’s debt to China.
“Kenya has a healthy mix of debt. The country’s lenders are not only China but also the World Bank and the African Development Bank, Japan, United States, and many others,” Uhuru said.
Uhuru further said that the debt incurred has gone towards funding infrastructure projects.
What would worry me is if the debt that we have incurred has gone into recurrent expenditure, has gone into paying salaries or electricity bills and so on and so forth. But what we have utilized our debt for is to close the infrastructure gap,” he said.
KENYA’S DEBT CRISIS
Since the jubilee government assumed office in 2013, the government has been on a borrowing spree and barely three years in his first term in office president Uhuru Kenyatta’s government was on the spot over the alarming borrowing.
According to data by the Treasury, by March 2015 the Jubilee administration had borrowed Sh874.5 billion between 2013 and 2015, overtaking Kibaki’s regime, which borrowed Sh738 billion in the Grand Coalition’s last term in office.
In the first quarter of 2016, President Uhuru Kenyatta’s government borrowed a total of Sh 226.78 billion (sh 843m per day). This was just between January and July 2016 (212 days), stretching an already huge public debt.
The International Monetary Fund (IMF) and the World Bank went ahead to raise red flags over the government’s borrowing, saying the ballooning public debt was bad for the economy.
Economist David Ndii also cautioned against the borrowing spree, saying the country would plunge in a “debt distress” for three years.
“It is not inconceivable that the appetite for African sovereign bond issues will wane as more African countries, us included, abuse their newly found financial freedom. Whatever the case, we cannot afford to continue on the fiscal path that we are on. It is reckless, ” Ndii wrote in a column for the Daily Nation.
In June 2018, Treasury revealed that Kenya’s public debt had crossed the Sh5 trillion mark ( 56.4% of the country’s gross domestic product) for the first time with a foreign debt to Sh2.563 trillion as at the end of February and Sh2.448 trillion Domestic debt as at May.
The International Monetary Fund recommends that ratios of public debt to GDP should not be higher than 40% for developing countries.
In February this year, IMF downgraded Kenya’s credit and withdrew the National Treasury’s access to a Sh150 billion stand-by credit facility.
The precautionary credit facility was in place in case it was needed to fend off any ‘external shocks’ such as a rise in oil prices, or the weakening of the Shilling.
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.
Unfortunately taxpayers continue to bear the economic impact of the heavy borrowing and corruption with increased taxes, which have reached an all-time high with the passing of the finance bill 2018 that has seen among other things Excise duty rates increased by five per cent as Treasury unleashed a myriad of tax hikes to raise revenue for the Three Trillion budget read in June.