From debt pressure to public doubt; How Kenya's 'First World' dream is tested

 

This will be one of those event-driven weeks as a difficult 2025 comes to a close. Yesterday was International Anti-Corruption Day, the 22nd anniversary of the launch of the United Nations Convention Against Corruption in 2023. 

Remember, Kenya was one of this convention’s first signatories, if not the actual first to sign off. Today, December 10, is Human Rights Day, when the 1948 Universal Declaration of Human Rights turns 77. 

If history is any guide, these landmark occasions — at least in the global scheme of things — will be marked in a fairly shy and low-key fashion around these Kenyan parts, at least at the official level. Will we ever get top leadership with the courage to make real statements on these days? Like say, a national State of Corruption address today, or a State of Human Rights one tomorrow? 

Of course, this is also the week in which we celebrate our 63rd Jamhuri Day, and it would appear that this year’s celebration throughout the week is driven by a tourism theme. For the record, December 12 also happens to be International Universal Health Coverage Day, so you can be sure President William Ruto won’t miss the chance to plug UHC and Taifacare into his national address. 

The overall address is largely predictable. There will be selective statements about where we are coming from and where we are today. You can also expect, following November’s State of the Nation address, new “third to first world” exhortations about where we are headed next. 

We will probably get more details on those four new mega-investment pillars: education, agro-industry irrigation, energy and transport/logistics, as well as the proposed National Infrastructure Fund (NIF) and Sovereign Wealth Fund (SWF). 

We might even get some clarity on the impending Kenya Pipeline privatisation, the Safaricom divestiture and other candidate deals now that the Government Owned Enterprises Act has been passed. And remember, all of this is on top of the ongoing implementation of BETA and the Fourth Medium-Term Plan under Kenya Vision 2030. One gets the feeling that there is lots of motion at the moment, but is there real movement? 

And this is not just about Thursday’s official address. Rather, it is the fear that officially announced ambitions are fast encountering serious roadblocks of public apathy and mistrust.  As a case in point, the proposed Safaricom deal is itself generating far more heat than light right now.  

This is not just the usual scepticism of political rivals, but genuine concerns about the public good. 

And it comes at a time when the government comes across as desperately seeking resources to finance its recurrent and development mandate, without raising taxes or securing new debt. 

Concerns have emerged about how public finance management rules are being stretched to accommodate off-balance sheet, “no new debt” financial engineering gimmickry, like the highly inter-generational securitisation of future revenues as a clever substitute for ordinary debt.

Now there are fears we are rushing to sell strategic public assets — our “national treasures” — for short-term gain. Yes, we hear that privatisation proceeds will be ring-fenced for the NIF and SWG, but remember these proceeds were once a line item to balance the 2025/26 budget (the 2025/26 recurrent and development estimates assuming part-financing by privatisation proceeds). 

Kenya does not have a happy history with funds, and we currently have too many (almost 100)! 

So, from these fears arise valid questions about why we are unable to rejig our fiscus back into proper working order by dealing with the spending elephant in the room. Of course, the latest story we hear is about increasing fiscal rigidity in our spending, meaning that too much of it, such as debt service or pensions, is non-discretionary and must be paid whether we like it or not. 

Hence, the need to pursue unorthodox (or heterodox) ways to finance our development agenda.   

The trouble here is we end up with today’s transactional debate around resource constraints.  It is difficult to reconcile the narrowness of such a debate with the first-world ambitions we profess. 

Which is why we need to come to this debate not from the resourcing side, but its visioning side. The vision here is the ambitious picture of tomorrow from our honest picture of today. 

Once we have this vision painted, the next thing is to approach the resourcing question from a perspective beyond the fiscus. As argued before, this would essentially be a “balance sheet” or “capital” approach where we work out how to harness our multiple capitals, or resources, towards national wealth creation — these capitals being land, natural, economic, financial, human, social and knowledge.

This is not an unusual perspective; the World Bank has, since the turn of the century, pursued some interesting work on the wealth of nations (as a guide to the sustainability of economic progress beyond GDP as its pure measurement) with country wealth estimates produced for natural (renewable and non-renewable), produced and human capital. 

Lest we forget, the developed created their wealth from our lesser-developed resources, right? 

But a more practical illustration of what this “balance sheet” approach means was provided by the African Development Bank in a 2025 Country Focus Report for Kenya.

Titled “Making Kenya’s capital work better for development”, the report observes — across five categories of capital — that our “fiscal capital is strained by debt and inefficiencies, innovation in business capital is limited, financial capital is unevenly accessible, natural capital is eroding, and human capital suffers from poor learning outcomes and skills mismatches”.  

Fiscal capital? That’s the traditional tax, spend and debt circus where we seem to be kicking the can down the road rather than fix it for the long-term. Business capital? These are the financial, physical and intellectual assets that firms leverage to fund innovations and operations. These firms operate mostly in the MSME space, which is three-quarters of our private sector. 

Financial capital? Our financial as in capital and money markets. Natural capital? Everything from forests to water to minerals. Haven’t we mapped our natural capital? What next? Finally, human capital, which, before we develop our natural capital, is by far our greatest capital resource. 

To unlock our development potential, the Bank harks on the need for coordinated action across local and global stakeholders. Specifically, on fiscal capital, expand the tax base by formalising the informal sector, accelerating compliance through digital education and tax administration, and eliminating inefficient tax incentives.  

On natural capital, scale up value addition in agriculture, mining and renewables. On business capital, expand credit guarantee schemes, simplify business regulations for MSMEs and seek partners to support venture capital and fintech infrastructure.   

On financial capital, deepen capital markets, leverage fintech and increase blended finance and public-private partnerships. On human capital, scale up digital and health infrastructure. The general point here is that capital is harnessed in a way that supports growth and wealth creation. 

And while these recommendations are illustrative, they point us back to the two things we keep missing in our ongoing “first world” debate. First, what exactly does this first-world picture look like? 

Second, what is the capital, or resourcing, strategy to deliver it? To repeat for the umpteenth time, let’s get our medium-term resourcing strategy, of which the medium-term revenue strategy is one part, in place. But mostly, let’s first get policy/strategy out of the way, then we can debate NIF, SWF and Safaricom or Pipeline privatisation as tactics and transactions.