Kenya debt

Kenya Public Debt Situation and Lesson for Others

Public debt is the obligation of the government to repay a particular amount of funds in the future. In most cases, Public debt is necessitated by the need of the government to cover the budget deficit when the proposed budget is higher than the projected own-source revenue for that financial year. Most countries have policies that incur deficit financing. Thus, it’s a regulated mechanism. Government borrowing could also be triggered to cover an urgent public investment. History indicates it is almost impossible for a country, especially developing and under-developed nations, to speed up economic growth through own-source revenue. The covid-19 pandemic forced many governments to take up loans for social protection.

Kenya’s Debt Profile

Kenya’s debt has been increasing since the country gained independence. Between independence and 2012, when the 10th parliament ended its tenure, Kenya’s debt was at Ksh. 1.8 trillion. The figures have dramatically increased since the 11th parliament began working, and by the year 2022, when the 12th parliament was finishing its tenure, public debt was estimated to be around Ksh. 9 trillion. According to documents at the Central Bank of Kenya, which is the custodian of the public debt register, Kenya owes Ksh. 4.1 trillion to domestic lenders and Ksh. 4.3 to external lenders.

Why I’m I talking of parliament and not the government of the day? This is because the legislative arm of government makes all public debt decisions, and in Kenya, that’s the National Assembly. The Constitution of Kenya 2010 strengthened the powers of the national assembly in the approval and oversight, among other roles; Approval of taxes and other revenue sources, including loans raised to fund development projects, is most important in controlling public debt. The last months of the 12th parliament saw the House increasing the public debt ceiling to Ksh. 10 trillion, giving the nod to the government to borrow Ksh. Eight hundred forty-six billion to cover the budget deficit. The House, therefore, plays a critical role in shaping the future of public debt in Kenya.

Interventions for Kenya to Cover the debts

There is no formula for reducing public debt. While there are various strategies that Kenya can employ to cover the current debt, the only viable ones are debt National debt bail-out, tax increase, and initiating spending cuts. National debt bail-out is Kenya getting the creditor to forgive part or all of the debts owed. The tax increase will pump extra revenue into the treasury at the expense of economic growth and the citizenry’s cost of living. Instituting spending cuts is the government deliberately taking measures to ensure reduced spending on development and recurrent expenditure. The government of the day doesn’t seem to appreciate this approach, as it has increased its spending since taking over the country’s leadership. Extra positions have been created to reward political loyalists, increasing fund allocations in individual offices. It makes it impossible to achieve a balanced budget.

How the citizenry can participate in public debt decision-making

A low-level debt is good in general as it spurs economic growth. High-level public debt increases volatility and can result in slow economic growth. Therefore, the need to control public borrowing, especially the debt ceiling. Parliament should not be allowed to continue adjusting the debt ceiling as borrowing is becoming too much, yet a substantial amount disappears in corruption. Former president Kenyatta once admitted that Kenya loses close to Ksh. 2 billion to corruption daily. The reports that external lenders could seize our infrastructures to repay themselves are worrying.

Article 1 of the constitution of Kenya gives Kenyans sovereign power and allows Kenyans to exercise the same directly or indirectly through the elected representatives. In the case of the public debt debate, Kenyans have given the members of parliament the mandate to speak on their behalf. The Members of parliament are, therefore, merely the representatives of their constituents, and any opinions and decisions offered in the debate should reflect that of their constituents.

There is a need for the members of parliament to go back to their constituents and hold town hall meetings on this issue and give their feedback to the national assembly. This should be the case for any legislation debated in parliament because it’s not about what the legislator feels but what the constituents want. That’s what working for people looks like.

Conclusion

Borrowing can have positive or negative implications on the economy. Excessive borrowing could be harmful, thus the need to strictly adhere to the policies on borrowing. Parliament plays a critical role in ensuring the government does not over-borrow. The citizenry also has a role in holding the parliamentarians accountable for their debt control role.

Joel Mianzi

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