These are tough times. Businesses have been shuttered, millions of people have lost their jobs and broke families are now skipping meals. The private sector has been brow-beaten. It will take time before activities in the hospitality sector get back to their pre-Covid levels following massive cancellation of bookings.
Pubs, bars and other entertainment joints as well as schools are still closed and it is not clear when they will be allowed to operate. Private investors are scared of sinking their money in an uncertain business environment, and have opted to put their money in long-term assets such as government securities. With a distressed private sector, the government cannot get its taxes.
Indeed, in the fourth quarter, the taxes that the government collected were signi? cantly lower. This is likely to continue into next year. Yet there is a need for action. There is a need for Kenyans jobs and businesses to be saved to forestall an even bigger crisis. But who will do this?
The government, of course. Governments all over the world have resorted to borrowing to cushion workers and businesses. Kenya also plans to borrow — a record Sh1 trillion between July and June next year to plug a budget hole that has been deepened by the negative impact of the Covid-19 pandemic.
Every other expert understands that governments have to borrow at this point to support their economies. But even as we plan to borrow, we must not forget that before Covid-19 came and disrupted everything, we were having a serious conversation on how to lighten the debt burden. When
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Uhuru came to power, the country’s debt was at Sh1.9 trillion. It has since increased to Sh6.7 trillion as of July this year.
Most of these loans are very expensive and their repayments have been made at the expense of critical public services such as health and education. While the government is free to borrow, it has to do so prudently. It should borrow cheaply so as not to overburden taxpayers.
It should go for cheap loans from multilateral organisations such as the World Bank. Moreover, the government should be able to account for the expenditure of these funds. The news of increased borrowing comes at a time when the country is grappling with allegations of theft of Covid-19 at Kemsa.
Borrowed cash should be put into pro? table development projects that would help the economy recover. And, as IMF advised, Kenyans should get back to austerity measures once the economy recovers.