That Kenya is facing debt-related fiscal distress is now widely acknowledged. The deteriorating fiscal situation has been noted by sovereign rating agencies as well as the IMF. Kenya is officially a borrowing nation, running on the wheels of debts.
Kenya seems to be under leaders who have a special skill in borrowing cash and a special talent in stealing the same. It seems almost everyone within the government is a thief. One would be forgiven to think that they all pass through the same college of thievery.
The Government of Kenya is pursuing various policy and austerity budget measures consistent with fiscal distress. The fiscal challenges emanate from debt. Surprisingly, the more they put in place “measures”, the more they borrow.
Since assuming office seven years ago, the Jubilee administration has increased the country’s public debt four-fold, from 1.5 trillion shillings to 6 trillion shillings as of the end of December 2019.
The Jubilee’s roaring appetite for loans has raised the country’s public debt to GDP ratio from 42 percent to over 60 percent, on par with the country’s historical peak indebtedness reached in the late 90s. Jubilee has borrowed upwards of 4 trillion.
In money terms, Jubilee has borrowed upwards of 4 trillion shillings (US$4b) and presumably invested it in various development projects. It is helpful to put a perspective on just how much investment capital this money represents.
In the four financial years 2013/14 to 2016/17, the national and county governments spent, respectively, 2.25 trillion and 334 billion shillings on development projects.
For every shilling spent by the county governments on development projects, the national government spent 6.70 shillings, close to seven times.
In absolute terms the county governments spent on average 7 billion shillings per county, while the national government spent 47 billion shillings per county.
In whichever county a Kenyan lives, they should be experiencing seven times as much development impact from the national government as from the county governments.
It is very doubtful that there is a county where the national government’s development spending is felt more than the county governments’, or even the Constituency Development Fund (CDF) sometimes.
Based on documented budgets, the national government could have funded 336 ‘Makueni Hospitals’ in every county. The County Government of Makueni earned accolades for completing a 200-bed women and children’s hospital at a cost of 140 million shillings. The 47 billion shillings county spending average works out to the equivalent of 336 Makueni hospitals per county.
The Kibra Constituency Development Fund (CDF) under the leadership of the late Kenneth Okoth also made news for completing a girls’ secondary school at a cost of 48 million shillings. The 47 billion shillings average works out to the equivalent of 160 Mbagathi Girls Secondary schools per constituency.
These are mind-boggling figures. Where are these projects that the national government has sunk well over 2 trillion shillings into?
Prior to the COVID19 crisis, the IMF had raised Kenya’s risk of debt distress from “low” to “moderate” and from “moderate” to “high” in the wake of the COVID crisis. Such is the mystery that Kenyans joke that to see the projects, you need to log onto “the portal”, referring to the administration’s 2017 election campaign website www.gokdelivers.go.ke.
At the same time, the Jubilee administration has been stalked by “mega” corruption scandals. Five cabinet secretaries have vacated office because of corruption allegations. The National Youth Service, one of the administration’s flagship programs, was engulfed by two egregious corruption scandals, commonly referred to as NYS I & II.
The first NYS fraud exposed what seemed to be serious fraud vulnerability of IFMIS, the government’s financial management software. The public would have expected corrective action. Instead, NYS II occurred, seemingly exploiting the same vulnerabilities as NYS I.
Several large projects are mired in controversy of one kind or another. Notable ones include the Galana-Kulalu irrigation project, the JKIA “greenfield terminal project, the medical equipment leasing scheme, and several large dams that have either stalled or turned out to be ghost projects.
At the end of his tenure, former Auditor General Edward Ouko, speaking at the launch of AfriCOG’s report State Capture- Inside Kenya’s inability to fight corruption spoke of a phenomenon he termed “budgeted corruption.”
Conventionally, we view corruption as affecting the budget at the execution stage, typically through the procurement process. At worst, we conceive corruption as distorting priorities such that projects that confer bribes and other private benefits crowd out more socially valuable spending.
The idea of budgeted corruption goes beyond this. It implies that the budget is inflated by monies that are earmarked to be stolen. Projects are conceived for the purpose of siphoning the money out of the budget. Ouko characterized such projects as “exit lanes”.
“From where I sit, I would like to introduce another theory, the theory of budgeted corruption. If we are starting on a journey, say from here to Thika, you can imagine the Thika highway, it has several lanes and the most important thing is the exits. Is our budget really loaded with corruption where you know exactly (at) which exit point it is going to be taken? This is where I am concerned—that we are in a situation where our budget is loaded with corruption.”
You can download the Highway Robbery Report here