Public debt to blame for Kenya's financial problems

Economic anxiety has led to deep social volatility never witnessed before. People are on the edge. Every statement about public finance is now carefully analysed by the citizens as many of them have become distrustful of the government. When young people were filling the streets on June 25, 2024, their message was unmistakable; we've been taxed enough already. But beneath that rage also lay a lot of uninterrogated assumptions. The chorus was; "government is wasteful, the taxes are too high, we don't see what the government is doing". But the most interesting assumption was that the previous administration was better than the current one because the whole country was a 'a construction site'. Let us examine the elephant in the room called public debt. The accumulation of public debt since 2013 is directly responsible for the difficult fiscal environment we find ourselves in today. As such, we must interrogate incentives for the large appetite for borrowing. We might not have given party manifestos enough attention but, sometimes, they are precisely where our problems or salvation lies. Manifestos are important for they ultimately turn into national plan. A day after the swearing-in of a president, technocrats begin to start worrying about how to fund the promises made. As for Jubilee case in 2013, a number of factors conspired against us. With the benefit of hindsight, I can say that the 'dynamic duo' were a bit unprepared for the job as at that point in time. Their thinking was that Kenyans' priority was swanky projects and 'all else would be added unto us'. So we got into the expensive Standard Gauge Railway and other big infrastructure projects. This also opened an avenue for brokers to get their cut. By 2016, the economy had started sending indicators that the national fiscal climate was not very promising. Allow me to speculate that after the acrimonious election of 2013, a big infrastructure project was both a tool for the Jubilee to brag that they were working and also to beat the opponents on the head. Remember, until then what we had was the old meter gauge railway that was built by colonialists. So out of the many outlandish promises that Uhuru and Ruto made in 2013, what we failed to ask then and have failed to ask every election afterwards is, what would be the cost of fulfilling their promisory note? For in the intervening period after 2013, what my friend described as procurement-led borrowing. Domestically, the interests of the elites who control lending institutions aligned like key and lock to the interests of the political class. With one team funding politics and another presiding over policy, the net effect was the violent crowding out of the private sector. If you ever wondered why small enterprises began to tank under Uhuru, here is your answer. With SMEs struggling, the revenue also took a downward spiral. The government response was raising taxes so as to raise revenue, thereby leading to an increase in the cost of living. We also went for the syndicated loans which were given at very exorbitant rates. On the external debt, we have much work to do. That will start with Parliament doing its work as envisaged in article 211, which is strong oversight over public debt. Remember debt is a political question and therefore must get a political answer. Mr Kidi is the convener Inter-Parties Youth Forum. kidimwaga@gmail.com

Public debt to blame for Kenya's financial problems

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