Kenya will next week host a continental
economic caucus, African Economic Research Consortium (AERC) session to discuss the looming debt crisis in the region.
The five-day plenary session starting December 2 to 6 is expected to bring together over 200 researchers, academics, policy makers and economists to discuss issues relevant to Africa’s economic development.
The meeting is coming at the time when most countries in the region including Kenya are under intense pressure to go slow on borrowing, with data from World Bank showing that 18 sub-Saharan African countries are at “high risk of debt distress’’ compared to just eight countries five years ago.
In Kenya, public debt has grown almost five folds in the past five years, moving from Sh1.89 trillion in June 2013 to Sh5.04 trillion in June 2018.
According to the Draft 2018 Budget Review and Outlook Paper issued by Treasury on September 19, Treasury intends to borrow up to Sh2.13 trillion in the next five years to fill budget deficits, sealing Uhuru’s debt at just above Sh7 trillion by 2022.
A recent report by ratings agency Moody’s Investor Service ranked Kenya among countries at the highest risk of losing strategic assets to China over huge debt.
“Countries rich in natural resources, like Angola, Zambia, and the
Republic of the Congo, or with strategically important infrastructure, like ports or railways such as Kenya, are most vulnerable to the risk of losing control over important assets in negotiations with Chinese creditors,’’ the report said.
China has funded several infrastructural projects in Kenya including the Standard Gauge Railway (SGR) expected to reach Naivasha from Mombasa at Sh477 billion from Beijing.
According to Moody’s Chinese lending to Sub-Saharan Africa governments rose nearly tenfold to more than $10 billion (Sh1 trillion) a year between 2012 and 2017, from less than $1 billion Sh100 (billion) in 2001.
Much of the lending has focused on infrastructure projects, including the power, transport, and communication sectors.
According to AERC executive director and immediate former CBK governor Njuguna Ngung’u, the 49th Plenary Session gives impetus to the growing debate about public debt in sub-Saharan African countries.
“Although Africa’s public debt hasn’t yet reached the proportions that triggered the Highly Indebted Poor Country (HIPC) initiative, perhaps the concerns regarding Africa’s present debt are the fact that the debt has risen sharply in a very short space of time,’’ Njuguna said.
He added that in the face of slow economic growth, weak global commodity demand, and inefficiencies in the use of debt, heavy debt servicing potentially raises concerns regarding sustainability, and carries immediate implications for macroeconomic stability and thus economic growth and development.