Pil­ing debt obli­ga­tions ma­jor cause of worry

Business Daily (Kenya) - - EDITORIAL & OPINION - Tread with care in bal­anc­ing of na­tional ac­counts

At Sh4.4 tril­lion, Kenya’s pub­lic debt is ev­i­dently ris­ing much faster than the tax­man’s rev­enue bag is ex­pand­ing. The debt load is well over half of the gross do­mes­tic prod­uct (GDP) now.

It will take ei­ther very high­yield­ing cap­i­tal projects or painful fis­cal tight­en­ing to keep the debt un­der con­trol in the next five to ten years. The oil re­serves dis­cov­ered in Turkana’s Lo­kichar basin could as well of­fer a magic wand that eases the loom­ing crunch.

Much of the cur­rent debt has ac­cu­mu­lated un­der the Ju­bilee ad­min­is­tra­tion. Suf­fice to say the Stan­dard Gauge Rail­way, which is billed as the coun­try’s sin­gle­most-ex­pen­sive project since In­de­pen­dence, was also built by the same ad­min­is­tra­tion.

There has been progress in the length of tar­mac built, hos­pi­tal equip­ment and pub­lic school ac­cess dur­ing the five-year Ju­bilee ad­min­is­tra­tion. The big ques­tion that, how­ever, hangs on the minds of those who care about the coun­try’s fi­nan­cial sta­tus is how the na­tional bal­ance sheet will look like in the short to medium term.

It could as well be that th­ese cap­i­tal in­vest­ments that the gov­ern­ment has made will start yield­ing at a level that makes the re­pay­ment bur­den more bear­able than is cur­rently ap­par­ent. This week, Trea­sury sec­re­tary Henry Rotich made three im­por­tant an­nounce­ments. Mr Rotich said the Trea­sury has cast its fo­cus on the in­ter­na­tional mar­kets with the in­ten­tion of float­ing a fresh Eurobond. He also re­vealed that the Trea­sury has ne­go­ti­ated a six-month de­lay for the pay­ment of a Sh77.3 bil­lion ($750 mil­lion) syn­di­cated loan bor­rowed in 2015. If the Eurobond does not come in time, Mr Rotich said that the Trea­sury will bor­row yet an­other syn­di­cated loan to re­tire the out­stand­ing one, which ma­tured late last month. Th­ese an­nounce­ments, plus other debt obli­ga­tions that the gov­ern­ment is pil­ing reg­u­larly such as the Sh30 bil­lion World Bank loan signed yes­ter­day with Kenya Power, is what raises ques­tions as to the coun­try’s abil­ity to re­pay. The de­te­ri­o­rat­ing po­lit­i­cal cli­mate does not help mat­ters in any way. A dis­puted Au­gust 8 pres­i­den­tial poll, and an even more di­vi­sive Oc­to­ber 26 re­peat elec­tion, have left the coun­try deeply di­vided.

The Trea­sury must take into ac­count all th­ese fac­tors and tread with care in its bal­anc­ing of the na­tional ac­counts.

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