Government should tread carefully on borrowing

The Government must tread carefully as it seeks to borrow funds for its signature development projects. A new report by the National Treasury to Parliament shows that the Government took up loans valued at Sh430 billion in just four months, mostly from foreign lenders, pushing up the country’s debt to more than Sh4 trillion.

Among the projects that the loans will finance include the Arror and Kamwarer dams at a cumulative cost of Sh70 billion, which the Government says will increase water availability for irrigation and domestic use.

While Government borrowing is critical for projects that require a large capital outlay, there is concern that the appetite for heavy borrowing could take the country to the point where it cannot bear the weight of debt.

Yet the Government is still under pressure to deliver on urgent programmes such as the repeat presidential election that is budgeted at Sh15 billion.

It is quite apparent that Kenya Revenue Authority cannot collect what it has set as a target. Reports last week indicated that by July, the taxman was already Sh29 billion short of its target. Of concern now is that by the time the financial year closes, the revenue gap might be significant enough to stall key public projects.

The Government has been cautioned many times before by economists and global financial institutions; tread with caution on borrowing.