Our nation has been grappling with public debt for quite a while. What is however baffling is the country’s attention is firmly transfixed on BBI, 2022 politics and political debts rather than the greatest existential threat to the nation, public debt.
What nation faced with a Sh8 trillion debt, prepares a budget in which Sh1 trillion will be borrowed amidst a shrinking economy? What nation, facing austerity measures from IMF to shrink its civil service, will expand its Executive and Legislature? What nation in recession can afford to engage in politics at the expense of the economy?
It’s beyond time for our nation to realise that the insanity of our government spending and our financial indiscretions pose a great threat to our national security. Most of the loans that the government is borrowing are shrouded in mystery. This is in breach of Article 201 of the 2010 Constitution that requires among other things openness and accountability, including public participation in financial matters
The world is replete with examples of nations that mortgaged strategic assets to China for failure to service loans. Sri Lanka signed over to China a strategic port for failure to pay loans it took to build the port. Zambia’s national electricity company ZESCO, a major airport and broadcasting corporation are under the threat of takeover for failure to meet loan repayments.
Many other countries such as Djibouti, Kyrgyzstan and Pakistan are facing debt-trap diplomacy in which China offers cheap infrastructure loans laced with the sting of default if the countries’ economies cannot generate resources to repay the loan. Are our strategic assets such as ports and airports safe? Public disclosure of the bilateral agreement signed to procure these loans will put this question to rest.
Another odd thing about the mega projects these debts are financing is that the contracts are awarded to foreign contractors who import the skills and technical know-how from their countries and they end up repatriating the financial resources they earn to their home countries. In essence, this arrangement denies our nation the economic stimulus that these infrastructural investments would have injected into our economy.
There is also a tendency to compare Japan and America to Kenya on the level of debt and their sustainability. Our economy dwarfs in comparison and is shrinking by the day. We don’t have a discernible monetary and fiscal policy other than an ever ballooning expenditure. Our key revenue sectors such as tea, coffee and sugar have been run down due to sheer neglect and corruption. Our tax regimes are driving companies to shed off employees.
It is estimated we lose a third of our national budget to corruption. The energy sector that was supposed to spur economic growth has been rendered inefficient due to its monopolistic nature. A classic example of the ruinous impact of the inefficiency of the energy sector is the municipality of Wajir, which has been in darkness for a whole year, dealing a severe blow to its economy that was resuscitated by devolution.
In effect, although we are wantonly borrowing, our ability to pay back these loans is shrinking due to declining productivity.
Decreased revenue will mean that we allocate huge resources to repay the loans at the expense of education, healthcare, manufacturing and agriculture, which will further lower productivity leading to eventual default.
If our nation does not change its course, we will visit upon ourselves one of the worst catastrophes this nation has ever witnessed, an economic crash. We will then be at the mercy of donor nations and international financial institutions. Our sovereignty as a state will then be in question.
To avoid this, Parliament should take its oversight role and responsibility to future generations seriously. Debt level should be a key plank of the manifesto of political parties in the next election. There is need for legislation to establish a national debt management institution that is independent from the influence of the National Treasury.
The institution should not only be tasked with monitoring the level of debt but also transparency and clarity to the public on the terms and conditions of public debt. In view of our declining productivity the nation must also learn to live within its means and pursue a balanced budget policy with the little resources we have.
Director, Corporate Leadership Solutions Centre Ltd
