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October 19, 2018

Borrowing is harmful to Kenya's economy

Treasury CS Hentry Rotich. / FILE
Treasury CS Hentry Rotich. / FILE

Kenya’s public debt threatens to cross the Sh5 trillion mark this year, if Treasury goes on with plans to float a new Eurobond to settle syndicated loans due in March and April this year.

Although the state is defending its borrowing appetite, stating that funds are channeled into infrastructure projects that will steer economic development, experts are concerned that most of those projects are not feasible.

The projects will require Kenyans to dig deeper into their pockets to repay dollar-denominated credit facilities.

This means that the country is at the mercy of the dollar. The higher the shilling depreciates, the more Kenyans will pay foreign lenders. This also puts the country’s creditworthiness on the spot. Already, Moody’s last year threatened to place Kenya’s B1 long-term issuer rating on review for downgrade.

This basically means that international lenders like the IMF and World Bank will shy away from funding government project or decline to intervene to cushion Kenyans from the fiscal deficit.

Internal and external borrowing is harmful to the country’s economic health. The state needs to diversify its revenue collection to meet its obligations




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