Already, a good chunk of our total tax revenue, nearly 25 per cent of total Government revenue, is going towards servicing debts. Unfortunately, the rate at which the economy is growing is not keeping up with the rate at which our debt levels are rising.
In short, we are not producing enough to be able to repay the billions of shillings we have borrowed. The country’s public debt stock surged to a whopping Sh4.5 trillion as of September 2017, up from Sh1.8 trillion in March 2013.
According to the International Monetary Fund (IMF), the country’s debt to real GDP ratio has since increased from 44 per cent in 2013 to 52.6 per cent within the same period, an indicator that the country is not producing fast enough to service its debts.
This is expected to hit 56.2 per cent, according to the IMF. And with National Treasury Cabinet Secretary Henry Rotich announcing that the country will go for another Eurobond, this is a projected spill over the 60 per cent mark.
In its latest report, the global lender says Kenya is among 22 countries where public debt rose above 50 per cent of GDP at the end of year as the country binge-borrowed to finance infrastructural projects like the Standard Gauge Railway (SGR), and new roads.
Clearly, we are living beyond our means, and it is time to make the hard choices. As an urgent measure, the Government needs to aggressively go after tax defaulters even as it seals all the loopholes of corruption and wastage.
Moreover, there is a need to audit some of the programmes which, even after years of soaking billions, have not yielded much in terms of productivity.
The projects that we pump billions into should give us better returns.
The International Monetary Fund opines the reduction of budget deficit could be done through broad-based revenue measures and pacing infrastructure investments over a longer period.
In other words, while it is not wrong to construct roads, railways, ports and other mega infrastructural projects, caution needs to be taken so as not to put the country in a precarious position.
When a country is in such a situation as a result of having unsustainable debt levels, a slight external shock, such as the strengthening of US Dollar against the shilling, is enough to tip the scales.
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