Kenyans should prepare for tougher times ahead if Jubilee is to meet the demands of debt repayment thanks to the Government’s appetite for loans.
The citizens will have to squeeze more taxes, be ready for inflationary pressure and fight bankruptcy as the government prepares to plug the gulf left by heavy borrowing particularly from China which now accounts for up to 65 per cent of bilateral loans.
In just one year, Kenya borrowed Sh632 billion from both external and domestic sources with the later having overrun by Sh25 billion in what Treasury attributed to increase uptake of domestic debt.
The latest data from Treasury presented to Parliament last week show the country’s appetite for bilateral loans and the commercial loans which are usually high priced has been on the rise compared to the less expensive multilateral loans, putting a strain on the dragging revenue collection.
“The overall increase in public debt is attributed to increase in external loan disbursements and also increase in the uptake of domestic debt during the period,” read the statement in the Quarterly Economic and Budgetary Review for the 2017/2018 Financial Year.
Nairobi-based economic analyst Robert Shaw however believes Kenya’s infrastructure-driven borrowing will tie up the current and the future generations on high unnecessarily high costs that would be avoidable if proper sustainability analysis was done.
He says the mega projects like the Standard Gauge Railway may have had a lighter debt load if the government considered a cheaper option to achieve the same objective.
“We must surely keep asking the question whether the rate at which this debt is growing is sustainable. Once we get it wrong on the costs of these projects, then we are straining for a debt that is not worth it. What about other critical infrastructure like hospitals and schools?” Mr Shaw paused.
In February, global credit ratings agency Moody’s raised the red flag over Kenya’s rapidly rising public debt saying it was weakening the country’s ability to repay its lenders.
Loans from China which accounted for close to 15 per cent of the Sh226 billion repaid to external lender last year has been a great concern as fears rise that Beijing may take too much control of the Kenyan economy.