• Data from the Central Bank of Kenya shows that this was impossible; Kenya was poor and struggling financially.
• The statement of audited accounts indicates that balances at Central Bank in the 1991/92 financial year stood at Sh2.25 billion in both domestic and foreign currency.
Image: FILE
Claims by President William Ruto that Kenya was more financially stable than South Korea 30 years ago so much so that it was lending money to the Asian country have generated debate online.
Whereas the revelation may have elicited a sense of pride in a section of Kenyans in the spirit of patriotism, some took the news with a pinch of salt as they tried to make sense of this new piece of information.
"I had a great revelation while in South Korea. As I stood in their church, I was reminded that this is a country where Kenya was lending money 30 years ago but today it's 10th economy," Ruto said during a Sunday service at Citam church in Karen.
He said his visit to the country was to seek support which they generously offered.
"I received a great revelation that it is not by might or power, but by the Spirit of God. I urge Kenyans to trust God," he said.
Thirty years ago takes us back to 1992, the year multiparty democracy was reintroduced in Kenya.
It was a time President Daniel Moi and Kanu’s grip on power came under threat from a united opposition in the lead-up to the general election of December that year.
In a bid to salvage his presidency, YK92 (Youth for Kanu), a lobby group of youthful politicians was hurriedly formed and managed to rally support for Moi’s reelection.
The team, under the leadership of former Lugari MP Cyrus Jirongo as chairman and Ruto as organising secretary, spearheaded the robust campaigns.
Back to Kenya’s capacity to advance financial assistance to foreign entities during this period, data from the Central Bank of Kenya shows that this was impossible; Kenya was poor and struggling financially.
The statement of audited accounts indicates that balances at Central Bank in the 1991/92 financial year stood at Sh2.25 billion in both domestic and foreign currency.
It said at the end of June 1992, Kenya’s domestic debt stood at Sh72.78 billion with treasury bonds accounting for most of the debt.
In the 26th CBK Annual Report for the financial year ended June 30, 1992, then CBK Governor Eric Kotut said the government’s fiscal operations in the 1991/92 financial year resulted in an overall cash deficit of 2.9 per cent of the GDP.
He said this was an improvement from the previous year where the cash deficit stood at 6.8 per cent of the GDP but subdued government expenditure and increased revenue and grants occasioned the drop.
“The deficit was financed mainly through borrowing from the domestic and non-bank sources which accounted for three per cent of the GDP,” Kotut said.
During this period, the government issued 52 treasury bills amounting to Sh14.8 billion and floated treasury bonds worth Sh13.5 billion in a bid to bridge the cash deficit.
A treasury bill is a paperless short-term borrowing instrument issued by the government through the CBK to raise money on a short-term basis, for a period of up to one year while treasury bonds are long terms of up to ten years.
“External financing accounted for 0.1 per cent of GDP while government indebtedness to the domestic banking system was reduced to 0.2 per cent,” Kotut said.
During this period, the governor said Kenya’s economy was much weaker compared to previous years as the real gross domestic product for 1991 grew at 2.2 per cent compared to 4.3 per cent the previous year.
He attributed this to a weakened global economy occasioned by recession and a -1.1 per cent drop in agricultural production and zero growth in the sector in 1992 due to unfavourable weather conditions and weak world prices for Kenya’s main export commodities.
“The manufacturing sector also performed less favourably, partly as a result of the contraction of the agricultural sector to which it is closely linked.”
Building and construction as well as tourism were other key domestic sectors that performed less satisfactorily in the tear, the governor said.
So bad were things in Kenya during this period that inflation rose from 20.8 per cent in June 1991 to 35.8 per cent in June 1992 driven largely by high food prices.
“The expansion in money supply and the budget deficit in the year also contributed to the high inflationary pressures, Kotut said.
According to the annual report, money supply appeared to be the only positive thing that was happening in the country in 1992, albeit with underlying drastic effects of high inflation.
“Money supply increased more rapidly in 1991/92 financial year by 20.2 per cent compared with 18.9 per cent in the previous fiscal year,” Kotut said.
This was the period YK92 bathed in cash characterised with generous Sh500 new currency notes as the lobby wooed jobless youth and defectors to the ruling Kanu.
The number of notes in circulation increased from 132.2 million in June 1991 to 150 million in June 1992 translating to Sh14.3 billion total value (21.4 per cent growth).
Kotut, however, said in the report that the increase in money supply was due to increased credit to the private sector which rose 26 per cent compared to 19.8 per cent the previous year.
“Credit to the government, however, declined by 1.3 per cent in the year,” he said.
The governor said in the report that Kenya’s economic recovery in 1992 would worsen on account of further decline in agricultural production and reduced demand for tea and tourism as industrialised countries were still smarting from recession.
“Prospects for the developing countries remain bleak as the positive effect of the recovery of the industrial countries in terms of increased demands for the developing countries exports may take time to filter through,” Kotut said.