With the Sh10 trillion debt ceiling, some economists now say the state might accumulate debt beyond what it can service.
This, they say, can lead to a debt crisis that can erupt with potentially large economic and social crises.
Is further debt accumulation sustainable, and what are the risks for major economies, financial markets, and taxpayers?
When the debt continues to rise, at some point the investors will lose confidence and their interest in the government's ability to pay back the borrowed funds.
This will make the investors demand higher interest rates on the debt, and at some point, these rates could even rise very sharply and create broader economic consequences.
The increase in interest rates will reduce the market value of outstanding government bonds, causing losses for the investors and perhaps precipitating a broader financial crisis by creating losses.
With the government borrowing more, a higher percentage of the savings available for investment would go towards government securities which will decrease the number of investments in the private ventures.
With a less productive community, the government will not be able to pay back the debt.
If the government wants to maintain the same levels of benefits and services without running large deficits, more revenue will be required which will raise the cost of living.
One of the simplest and easiest ways to reduce government spending would be to raise productivity.
This will reduce the spending on commitments without any economic costs.
The government should thus think twice about the Sh10 trillion debt ceiling.
It is not profitable to increase loan savings.
Let the government stop loan borrowing.
Borrowing large sums of money will reverse the country's economic development and other underlying undesirable effects.
The huge debt might also hinder us from achieving Vision 2030
Communication and media student at Rongo University
Edited by Kiilu Damaris
