On debt, Ruto must not borrow Jubilee's script

President William Ruto at State House, Nairobi. [PCS]

The government is planning to embark on an ambitious plan to expand the Standard Gauge Railway (SGR) to different parts of the country including Malaba and Isiolo and further to Moyale (on the border with Ethiopia) and Nakodok (on the border with South Sudan).

This is a laudable move that would further ease the movement of cargo and people. It would especially be a game changer for northern Kenya, a region that previous administrations have not paid much attention to despite its economic potential.

The plan, however, is coming at a time when Kenya cannot afford it. In the plan, the Kenya Kwanza administration wants to complete SGR from Naivasha to Malaba as well as extend it from Mombasa to Lamu and further up the Lamu Port South Sudan Ethiopia Transport Corridor. The grand projects are expected to start this year and to be completed by June 2027 at a cost of Sh2.1 trillion.

The bulk of this is expected to be financed through foreign loans.

Over the short four years to 2027, the government plans to borrow Sh1.8 trillion for the different projects. This is at a time when the economy cannot afford to take such huge loans, especially going into one project.

It is also coming at a time when Kenya is struggling with debt repayment. As recently as March, the government delayed salaries of civil servants and at the time, a senior advisor to President William Ruto told them to choose between timely payment of salaries and default on debt, with the latter having dire consequences for the country.

The expansion of the SGR network, while a brilliant move, could throw the country further into the debt crisis it has found itself in. Also, while needed to ease movement of cargo and people within the country as well as connect the country to its neighbours, the move is not urgent.

The current administration got into power partly on promises that it would slow down on borrowing, but the grand railway project does not inspire confidence that this will be the case. It would be borrowing from the Jubilee government's script, which it criticised as having gone on a debt acquisition spree.

Kenya's public debt stood at Sh9.39 trillion as at March this year. The Ruto administration has since taking office in September borrowed Sh690 billion.

This is already close to the Sh10 trillion ceiling set by Parliament last year, leaving little room to borrow. There have been plans to review the ceiling and instead of an absolute figure, convert it to a percentage of the GDP to give government room to borrow.

As it is, the government is increasingly finding it difficult to service debt, considering the tax revenues and other competing needs.

The extent of the strain in servicing debt is seen in a recent report by the National Treasury, which notes that at least Sh1.1 trillion in debt repayments is due to domestic lenders over the next 12 months with up to Sh2 trillion due over the next five years putting more strain on taxpayers. Kenya Kwanza must keep its promise and slow down on borrowing.