Kenya’s series of debt is moving towards the red zone and soon the country will be unable to handle the piling debt, the World Bank has warned.
The country, which is still servicing the controversial Eurobond cash, may not be able to deal with the tough times ahead if the ever increasing borrowing culture is not tamed by the current administration according to the report released by the World Bank.
Early this year, the Treasury disputed claims that the country had borrowed beyond the recommend IMF standard saying that the country was still within the borrowing zone. When the new budget for this financial year was announced in the month of June, it was in deficit of more than 6.9 billion US Dollars which had to be sustained through borrowing bringing into being the new phrase ‘a budget driven on the wheels of debt’.
During the reading of the budget, the Cabinet Secretary of the Treasury, Dr. Henry Rotich said that Kenya’s public debt remains sustainable with the net press value, at that time, of public debt to 50 GDP below in which he said posed low risk of debt distress.
The World Bank warning comes amidst Treasury’s constant assurances that the debts the country is undertaking are manageable and that the economy is unlikely to be compromised. The repost that was released on Monday disputes these and says that there is an over 13 percent point of GDP in the debt-to-GDP ratio within a three-year period and the reports goes on to indicate that the debt levels are over 50 percent with the fiscal deficits being well above the medium term of 4.5 percent warning the country that the fiscal policy is fast eroding and margins for further debt accumulation are narrowing.
In a similar report that was released by the International Monetary Fund, IMF, every Kenyan was found to be owing the world at least 79,000 shillings, figures that were vehemently disputed by the administration of the day. Between December 2014 and December 2015, the Jubilee administration had already borrowed 680 billion shillings increasing the debt for every Kenyan by 17,000 shillings. During that period of one year, the amount that had been borrowed was more than half of all the country’s revenue for that fiscal year.
According to the World Bank report on Monday, the public debt for Kenya has increased to 55.1 percent of the GDP in the fiscal year 2015/2016 from 42.1 percent of the GDP in the fiscal year 2012/2013. Many quarters have been questioning the spending of the government with the majority of the economic analysts saying that the Jubilee government was extravagant and massively spending on wasteful projects.
One of the major ways where the Jubilee government is wasting money is through corruption. It is said that the country often loses a half of its budget through corruption. Runaway corruption is on the rise in the country with the government seeming to be doing little to curb the vice. The President himself has said that he is already frustrated with corruption to the point of asking Kenyans what do you want me to do?
The World Bank Report says that revenue is projected to grow by 2.3 percent points in 2016/2017 to 21.3 percent of the GDP compared to the 19 percent of the GDP in 2015/2016. The report further says that expenditure on the other hand is projected to increase by 3.7 percent point of the GDP during the same period.
The government has had had to borrow billions of shillings in order to fund some mega infrastructural projects like the Standard Gauge Railways especially after the pulling out of Rwanda which opted to build her railway to Tanzania which was seen to be much cheaper than through Kenya. This is also what led to the huge budgetary deficit in a budgetary statement released by the Treasury during the month of June.
The National Treasury is already preparing to launch another foreign borrowing in what the opposition has termed as another saga in making. The opposition, through its leader Raila Odinga, has warned investors against investing in the Eurobond given that the Eurobond billions that had been borrowed before are yet to be fully accounted for. The Treasury argues that the billions that it is planning to borrow are for the financing of the more than 600 billion shillings’ budget deficit for this year that was 2.2 trillion shillings.
For the past four years that the government has been in power, billions of shillings have been borrowed including the 250-billion Eurobond loan that is still generating heated debates and it is estimated that the borrowing could soon skyrocket to more than 60 percent of the GDP.
As it is the norm, journalists shall continue writing, enthusiasts of the social media will continue showing their online anger but borrowing shall continue and the debt shall continue growing.