The Central Bank of Kenya has warned that the country does not have any more headroom left for borrowing to finance development projects.
CBK Governor Patrick Njoroge on Wednesday said our borrowing has reached the maximum limit and the focus should now shift to Public Private Partnership non-debt models for projects.
The International Monetary Fund officials had warned that country’s excessive borrowing amid huge revenue deficit for the economy is worrying.
Kenya’s debt stands at Sh4.6 trillion as of November last year.
“The headroom (for borrowing) has now decreased. We cannot continue borrowing for spending on even the good projects. We need to move into the non-debt financing of our development projects,” said Njoroge.
Speaking during the media briefing on the scorecard of the Vision 2030 to the economy 10 years since its launch, Njoroge, however, said the county’s debt is sustainable.
The CBK Governor gave an example of the proposed Sh300 billion Mombasa-Nairobi Express Highway, which the government wants to partner with private entities to build the new six-lane expressway by American construction company, Bechtel.
The said private-public-partnership option will allow a company or a set of companies build the road and then recoup their costs by charging tolls.
“Mombasa- Nairobi Express Highway is one of the PPP project that is non-debt. We did look at the financing proposals and are quite exciting. It takes a little longer, but the benefits look like it is done correctly and this may be good example of such non-debt project,” he said.
However, Dr Njoroge warned that before settling for such proposal, there is need to make sure that there is enough consultation and stakeholders’ engagement.
“PPPs are one set of options that may or may not work in some projects, its is not a sought of a silver bullet, it needs to be applied correctly,” he said.
Vision 2030 Delivery Board, Dr James Mwangi said the Kenya’s debt is manageable, but the government cannot continue to borrow to finance projects.
“Our current debt is sustainable, but we do not have headroom for more borrowing. We can borrow in case of emergency, but not for roads or any other project. We have to retain that headroom by engaging in PPPs,” he said.
He said however in fullness of time, Kenyans will come to appreciate when they start getting returns of the projects in which these debts were used on.
“The SGR, education, health, port of Mombasa, the airports and roads are some of the projects that require huge capital investment. The government has done what it was supposed to do and in fullness of time, we shall see results,” said Mwangi.
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