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Bad borrowing habits back to haunt us

By Editorial | April 5th 2020

Kenya’s total debt touched Sh6.16 trillion in February after the country borrowed an additional Sh158 billion in two months. As a percentage of the gross domestic product (GDP), or the size of the economy, the country’s debt has since surpassed 60 per cent. This makes our debt unsustainable. We have little leg room for borrowing, thanks to our high appetite that saw the debt levels spiral to the current levels.

Yet, there has never been a time when a country needs to borrow as now when the coronavirus is wreaking havoc. With taxes likely to underperform due to closure of businesses and massive layoffs, the government has the only option of borrowing to bolster its health system and stimulate the economy. Resources for Covid-19 testing and treatment must be boosted. Regular health care, food production and distribution, essential infrastructure and utilities must be maintained. All these need money. Yet, the space for borrowing has narrowed. Moreover, this is the worst time to borrow.

Investors are jittery. Of course, Kenya has some undertaking from the International Monetary Fund and World Bank who have promised Sh122 billion, but this might not be enough in a hurting economy.

It would have been better if the country had some additional cash in its coffers. But it does not. By February, the National Treasury had a paltry Sh2.8 billion in its coffers. This is not even close to the Sh5 billion that Treasury had earmarked for emergency spending in the current financial year.

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