Prepare to start paying debts after expiry of grace period
By Editorial | February 12th 2021
The supplementary budget released this week by the National Treasury gave us a glimpse of the financing package the Government has crafted to ensure continuity of key projects.
It’s no secret the current economic and financial market uncertainties brought about by the Covid-19 pandemic have created many challenges, necessitating dynamic survival measures.
So when the country’s big lenders agreed to defer loan and interest payments recently, this offered the National Treasury a breather in the face of bad economic times.
As a result, the Government saved some Sh78 billion, money that would have gone into the pockets of the bilateral creditors. These funds were redirected to capital generating projects such as roads and agriculture, and to kick-starting our slow-moving economy.
This is welcome news. But even as we celebrate, the deferment of debt repayment, we should be alive to the fact that the reprieve will not last forever. Soon the lenders will come knocking, demanding to be given what belongs to them.
It is, therefore, important for the Government to go back to the drawing board during, pore at its balance sheet, do its math and find ways raising money to repay the debts when the the grace period elapses. As we have pointed out, the economy is in dire straits and we are not sure when things will start looking up.
There are several ways the Government can bolster its treasury so as to raise funds to meet its debt obligations. They include exploring ways of shoring up dwindling revenues, including by ensuring everyone pays their fair share of taxes; cutting all wasteful spending and stepping up the war against corruption. If the loopholes that lead to pilferage of the Sh2 billion daily that the president talked about recently, we would not have a problem paying our debts.
As it does that, the Government should also consider negotiating with the lenders so as to restructure the debt.
Importantly, as we see scratch our heads over the national debt, we should learn from the current predicament and desist from amassing more debt. Kenya's debt now stands at Sh7.3 trillion.
It is evident that with prudent fiscal policy, the country’s expenditure would not have ballooned to where it is now. We would also not have found ourselves in humiliating scenarios where we have had to rob Peter to pay Paul.
Had we been more careful, we would not be kicking the debt can down the road as we are doing.
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