An editorial on debt sounds cliché, tired and boring. But we will repeat it nonetheless. As a media house, we will repeat this message until those who are responsible for ensuring that we live within our means get it right.
Kenya’s public debt currently stands at Sh4.6 trillion, meaning each Kenyan has a debt of at least Sh102,000. True, this is still lower than the country’s GDP per capita (or the economic worth of every Kenyan) which stands at Sh157,700.
However, debt per capita has grown faster at an eight-year compound annual growth rate of 15.4 per cent as compared to GDP per capita at 9.8 per cent. This is worrying. It is worrying because, as an economy, we are not producing as fast as we are borrowing.
Poor economic growth means poor tax revenues. And without adequate tax revenues, spending on such critical sectors as health, education, and other development activities will suffer as most of the money goes into repaying debts.
Already, things have become so difficult that the Government has been forced into refinancing, a finance lingo for borrowing from Peter to pay Paul. The fact is that Kenya has been running huge fiscal deficit- a situation when government’s total expenditures exceed the revenue that it generates. This has seen the country’s credit worthiness downgraded by the rating agency Moody’s.
Moreover, running a high fiscal deficit which translates into increased debt stock, has seen the International Monetary Fund discontinue Kenya’s access to a precautionary credit facility which is critical in shoring up the country against external shocks such volatility on exchange market or sudden spike in prices of crude oil.
The story of Kenya’s public debt is grim, and something needs to be done. Both national and county governments need to seriously cut-back on non-essential expenditures.
Allocations to numerous foreign trips need to end. The Kenya Revenue Authority needs to also go aggressively after tax cheats. Every adult in Kenya should pay taxes.
Also, the Government needs to invest in projects that increase productivity. We commend President Uhuru Kenyatta for prioritizing agriculture and manufacturing as part of the Big Four agenda. These will have immediate impact on Kenyans.
But we seriously need to tame our growing debt. Because bad economics, more than even bad politics, is likely to damage this country in an irreparable way.