Debt strategy dallying with death

By Dominic Odipo

What does Prof Njuguna Ndung’u, Governor of Central Bank of Kenya, mean when he tells us that the national debt position —at three times revenue — is now "sustainable and manageable"?

In what sense has debt suddenly become sustainable and manageable, even as money has got tighter all round and the shilling has been eroded to just under 80 to the US dollar? In what sense has debt become sustainable and manageable that it was not this time last year?

If the good Governor wants us to believe him (since these days we do not routinely believe Government pronouncements), can he give us direct, unequivocal answers to seven questions:

How much did the Government pay out last year, in the Kenya shillings equivalent, to service the national debt? How much of this amount went to lowering principal and how much of it was interest payments?

Which particular debt contracts were we paying to service? How much did we pay against individual contracts and who were the actual beneficiaries? What was the ratio of these debt repayments to what Government spent over the last financial year on health or education? How much new debt has Government contracted in the last year? And what is the total outstanding debt, both foreign and domestic?

Anglo Leasing notes

Only after Governor Ndung’u gives us these figures and names can we be in a position to judge whether the country’s national debt position is actually "sustainable and manageable." The days when Kenyans used to take such blanket Government pronouncements as fact are long gone.

And, now, take the Treasury: In another of those grossly inefficient uses of public funds, Treasury Permanent Secretary Joseph Kinyua took out expensive space in the major newspapers last week to tell us this: "We wish to take this early opportunity to put the record straight and reassure Kenyans that the Government’s commitment not to honour any of the controversial Anglo Leasing-related promissory notes remains unwavered."

The promissory notes the PS was referring to, worth Sh270 million, were in favour of Midland Finance and Securities Ltd.

Just what was the PS saying? Why such convoluted choice of language? If he simply wanted us to know that the Government would not pay out any money against these particular promissory notes, why did he not just say so in plain language? Why all the stuff about Government commitment remaining unwavered? Could the PS have forgotten that a person’s commitment to something or some ideal can remain "unwavered" even though certain circumstances or other considerations drive them to take a contrary course of action?

In the same statement, the PS stated: "The truth of the matter is that no expenditure to Midland Finance and Securities has been appropriated and approved by Parliament in the Budget of fiscal year 2008-9." He adds that this fact can easily be verified from the Estimates of Recurrent Expenditure for the year, which one can easily find at the Government Printer.

Illegal payments

But what, in fact, is the real position? It is that certain ministry estimates are given in lump sums and cannot be unbundled by an outsider’s eye. Most of the defence estimates, for instance, and a good deal of others within the Office of the President, are not unbundled item by item.

Suspicious or even illegal payments could be built in there, hidden even from the eye of the PS himself! This question of national debt is a matter of utmost importance. It must not be swept under the carpet or disguised in platitudes wrapped in other platitudes. Consider this: In 1953, the British colonial government borrowed Sh500 million to buy military aircraft to bomb Mau Mau freedom fighters out of Aberdare Forest. We inherited this debt at Independence and for years we have been servicing a loan contracted to provide the capacity for killing our own people.

Children dying

Every month, as our children die all over the country for lack of basic medical supplies, the Government is forking out about Sh7 billion to service this dubious national debt.

For every shilling we invest (development spending) in education, five are set aside to pay off debt. For every shilling we invest in health, seven go to into servicing the national debt.

This means that servicing the debt at current levels is directly translating into the death or disability of our children.

If this is the position Governor Ndung’u chooses to label as "sustainable and manageable", we respectfully but very vigorously disagree.

It is not and cannot be!

Res ipsa loquitur!

The writer is a lecturer and consultant in Nairobi.

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