Sri Lankan PM Mahinda Rajapaksa resigned on Monday following days of nation-wide protests over the cost of food and fuel that had driven inflation to 30 per cent up from just six per cent in August last year.
Rajapaksa is now holed up in a military base as protestors around the country burn down homes belonging to politicians believed to have contributed to the country's economic crisis while his brother, President Gotabaya Rajapaksa refuses to heed calls to resign.
Sri Lanka is the latest country to witness socio-economic upheavals stemming from the inability of government to keep up with debt repayments, fund day-to-day operations and development projects.
Zambia, Lebanon, Argentina, Belize and Suriname are some of the countries that have defaulted on their international debt obligations.
Until their defaults, these developing countries were all hailed as the bellwether for economic development in their respective regions. Today, their citizens are experiencing the worst economic crises in a generation with businesses closing up, mass unemployment, and high food prices with no end in sight.
Kenya's inflation for the month of April stood at 6.4 per cent, similar to Sri Lanka's last August before citizens took to the streets.
The high cost of living is impacting both businesses struggling to recover from the Covid-19 pandemic and households struggling to tighten their belts and build savings to help them climb up the socio-economic ladder.
Despite all the reassurances and speeches from the government and the National Treasury, several indicators point to Kenya being on the brink of a severe debt crisis that the country has never experienced before.
According to the Controller of Budget, Kenya spent Sh1.1 trillion out of Sh1.3 trillion of the consolidated fund on debt repayment in the first half of the 2021/2022 Financial Year.
This means less money is available for both recurrent and development expenditure with the National Treasury now resorting to taking on more foreign debt to pay salaries and wages in complete violation of public expenditure protocols.
Last year, the National Treasury backdated Sh165 billion in budgetary expenditure for the 2020/2021 Financial Year. The money came from proceeds of a sovereign bond and the International Monetary Fund that were then disbursed to ministries and county governments.
The fact that the disbursements were, for the first time in Kenya's recent economic history, made after the end of the financial year, means the government had quite literally gone broke.
Ironically, this happened the same year KRA reported surpassing revenue collection targets for the first time in almost a decade with more than Sh60 billion.
With the public debt blowing past Sh8 trillion and Sh1 trillion in debt repayments expected in the current financial year, the National Treasury should ensure that Kenya does not fall into the kind of debt crisis being witnessed in other parts of the developing world.
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