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The ticking time bomb that is Kenya's debt burden

EDITORIAL
By The Standard | June 15th 2016

Kenya is on a borrowing spree that has pushed the outstanding debt to Sh3.4 trillion, according to figures released by Treasury last week.

Already, Treasury has set the stage for a Sh689.1 billion loan to plug the budget deficit. Make no mistake, countries like the United States ( the World's biggest economy) and Japan (third) have GDP-debt ratios of over 100 per cent. According to the World Bank, Germany, Europe's biggest economy and one of the countries regarded as fiscally disciplined, had a debt to GDP ratio of 79 per cent in 2013. So debt is not entirely a bad thing.

As long as the money borrowed is put to productive use to create value from the investment. But in a country where accounting for public funds is questionable coupled by a low absorption rate for development expenditure, there ought to be extreme caution because debt that in any case ends up burdening tax-payers with little or no value to show for it is unnecessary.

Moreover, other than a good chunk of the money lining the pockets of a few, most of it often ends up as salaries and allowances and other recurrent expenditure. And in cases where such debt positions are not supported by adequate tax revenues, the country is perilously exposed.

Lastly, Treasury Cabinet Secretary Henry Rotich's assurance that the debt levels are manageable smacks of cover-up given the shenanigans surrounding the Sh269 billion Eurobond proceeds.

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