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Uhuru defends Jubilee’s Sh6.7 trillion debt spree

Economy

Uhuru defends Jubilee’s Sh6.7 trillion debt spree

Thursday June 02 2022
madaraka-uhuru

President Uhuru Kenyatta. NMG PHOTO

President Uhuru Kenyatta on Wednesday during Madaraka Day celebrations defended his government’s borrowing which is projected to hit at least Sh6.7 trillion by the time he leaves office, saying it was necessary to fund infrastructure and accelerate economic growth.

President Kenyatta who is set to leave the office at the end of his constitutional two terms in September on Wednesday dismissed critics saying the debt-fueled massive infrastructure projects around the country.

“We used ‘other people’s money’ to close our infrastructure gap and to connect our markets.   If it took a maize trader 3 days to travel from Kitale to the border of South Sudan, what we borrowed ensures that it takes him now just 5 hours,” said Mr Kenyatta.

“And if we can transport 10 times more passengers with SGR at half the price and half the time and move 3 times more cargo daily from Mombasa to our neighbours, then our borrowing has surely been worthwhile and paid tangible dividends.”

President Kenyatta’s administration has relied on loans to build roads, bridges, power plants and the standard gauge railway (SGR) since he took office nine years ago.

This has ballooned public debt from Sh1.89 trillion the Jubilee administration inherited from President Mwai Kibaki, to a projected Sh8.59 trillion by end of this fiscal year in June.

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This means Mr Kenyatta’s government will have borrowed at least Sh6.7 trillion by the time he leaves office.

Public debt stood at Sh8.2 trillion in December from Sh1.89 trillion in 2013. The loans —which include billions of dollars from China — are pushing against the nation’s debt ceiling.

“I want to pose a National Question: How much is ‘too much’ borrowing? When does borrowing become ‘too much’ and unbearable to a nation?” he posed.

The two front-runners in the race to succeed Mr Kenyatta in the August election — Deputy President William Ruto and Opposition Leader Raila Odinga — have both raised concerns over the mounting debt.

“Debt must be the last resort. We must not be slaves of debt from any place or any country,” Dr Ruto said last month while receiving his new party’s nomination.

Mr Odinga is mulling renegotiating short-term commercial loans, echoing the present government’s plan to refinance or substitute commercial loans with cheaper options from friendly nations or development financiers like the World Bank.

“We have two categories of loans but the short-term commercial debts with shorter times of repayment and higher interest rates are the ones that are punitive and we intend to find a way of renegotiating the repayment rates,” Mr Odinga told a forum at the Chatham House in the UK recently.

But Mr Kenyatta said developed nations had leveraged on debt to grow their economies.

“When South Korea achieved its economic ‘miracle’ in a record 25 years, it also achieved the rank of being the 4th most indebted country in the world.  But they did not call it debt, they called it ‘using other people’s money’ to advance their course,” he said.

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The Treasury has since asked MPs to raise the public debt ceiling to Sh10 trillion to allow the State to borrow Sh846 billion to plug the budget deficit in the fiscal year starting July 1.

The lawmakers raised the debt ceiling to Sh9 trillion from Sh6 trillion previously in October 2019.

President Uhuru Kenyatta’s successor will require an average of Sh3.74 billion daily to repay the country’s mounting debts, underlining the heavy debt burden the new government will inherit from the Jubilee administration.

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