Give it to the Kenyan government, a one-of-a-kind state that itches when it hasn’t borrowed. Not long ago after the Chinese denied us another loan and gave the country an avocado deal, the government has seen it best to ask for a whopping 75 billion-shilling loan support from the World Bank to finance its agenda.
The move shows just how much the government is desperate and hellbent on adding more public debt to the already worsening situation. It is the first time in decades that Kenya is reaching out to the World Bank.
According to reports, the lender is yet to sit down and deliberate on whether it should or not approve the loan.
Described as an Inclusive Growth and Fiscal Management Development Policy Financing support, it is one stupid move – at least that is how we broadly see it since we are tired of the government and its insatiable appetite for loans.
In fact, this kind of support has never been tried in a damn long time considering it is quick-disbursing loan facility that injects money directly into the budget to supplement the public docket.
What the government should have done is ask for this support in terms of funding projects directly, not for topping up the public purse while claiming it will support the Big Four Agenda.
In a letter written by Treasury Cabinet Secretary Henry Rotich, dated March 13, 2019, to Kristalina Georgieva, the President of the World Bank, the terms say that the money will be channeled to funding the Big Four Agenda.
The Treasury says that the funds will be used to support affordable housing; enhance farmer incomes and food security; create fiscal space to allow the government to invest in key development programs, and crowd in private investment and leverage digitization to support the government’s inclusive growth agenda.
The question, however, is how sure are we that the funds will be used for the purpose and not for political activities? The budget is not tied to any specific project and that is one big flaw that makes this whole thing a fickle business.
If the loan is approved, the facility will be hot on the heels of the 210 billion-shilling Eurobond that the country raised in May for funding infrastructure and to settle the maturing debts.
During the first quarter, the state borrowed 125 billion shillings in a syndicated loan as part of the 299 billion-shilling commercial debt it budgeted for the 2018-19 financial year.
Meanwhile, the public debt is rising and ordinary citizens long felt the pinch. The public debt hit 5.42 trillion shillings in March 2019 as domestic debt stood at 2.7 trillion shillings.
As at the end of 2018, the debt stood at 5.28 trillion shillings matching 52.7 percent of the country’s GDP.
It beats logic that the government says it is aiming at bringing down the public debts when it can’t stop borrowing.
Henry Rotich had been noted saying that the Treasury was aiming to ensure that debt servicing costs are brought down in the next few years to between 12 and 16 percent. Seems to many that this will remain a wild goose chase.
Kenya’s economy is now threatened more than before. Who will tell the government that conducting lifestyle audits on all public officers and aggressively executing compliance to wealth declaration by public servants is the solution to bringing down the immense debt?
The burden is growing and already, experts have warned that Kenya’s debt position is incredibly low, which in itself a dangerously massive systemic risk.
There is no return to these loan facilities. They are largely used to fund recurrent expenditures and not for development purposes. This is the reason why the country will continue borrowing thinking it is doing so for a good cause.
Even the Parliamentary Budget Office (PBO) noted this in its report and it said that the Treasury was masking the true budget deficit by using a set of numbers that ignore adjustments.
PBO claimed that the budget is off the ceiling and that the 2019/2020 budget is higher than the approved ceiling by 78 billion shillings.
“The higher expenditure levels have been accommodated through upward adjustments in the revenue projections from the BPS level by about Sh35 billion,” the PBO report to Parliament notes.
Yeah, well, that is Kenya for you.