Kenya’s expenditure on loan repayments is expected to cross the Sh1 trillion mark in this financial year. This is after the Parliamentary Budget Office (PBO) advised the National Treasury to reschedule payments of domestic debts to ease the burden on taxpayers.
Kenya’s economic crisis is blamed on expansionary fiscal policy driven by huge spending on infrastructural projects. The current regime led by President Uhuru Kenyatta recklessly borrowed from China to fund mega projects including roads and the Standard Gauge Railway (SGR) whose cost was inflated.
As a result, gross public debt ballooned from 44.4 % of GDP at end-2010 to an estimated 79% of GDP at the end of 2021.
China became Kenya’s largest bilateral creditor after its loans to the country rose from Ksh63 billion ($554 million) to Ksh478 billion ($4.2 billion) in Kenyatta’s first term.
According to PBO estimates, debt servicing costs will now stand at Sh1.36 trillion (10% of the country’s Gross Domestic Product (GDP) in the 2022/23 financial year, which is 77% growth from the Sh765.9 billion spent by the government in servicing loans in 2020.
The accumulation of Chinese debt has caused anxiety among Kenyans as experts warn that the country is headed the wrong direction that countries like Sri Lanka have found themselves in.
Kenyatta’s second term in which he works closely with his handshake brother Raila Odinga has overseen the loans increase by trillions of shillings in four years but repayment terms are not made public.
Chinese loans funded the standard gauge railway (SGR), whose commercial viability has been the subject of intense scrutiny. Nobody knows whether it’s making profits or losses.
Kenya now finds itself in same position that Sri Lanka is after excessively relying on Chinese loans.
The current Sri Lanka’s economic crisis is attributed to Chinese-funded projects that stand as neglected monuments to government extravagance.
Sri Lanka borrowed heavily to plug years of budget shortfalls and trade deficits, but squandered billions of dollars on ill-considered infrastructure projects that completely drained public funds.
The Island nation is in its worst financial crisis since independence from Britain in 1948, with months of power outage and acute shortages of food and fuel.
Kenya is facing a similar crisis; in the month of April Kenyans were faced by severe fuel crisis amidst increased cost of living and prices of food items.
In September 2021, President Kenyatta declared famine a national disaster after 3 million people were found to be at the brink of dying from starvation due to prolonged drought and the situation is deteriorating.
The effects of the depleted economy are affecting businesses with foreign investors now shifting the Kenyan market to other nations.
Nairobi Securities Exchange on Monday reported Sh294 billion loss in a month which is attributed to a sell-off by foreigners that has pulled down the value of the bourse to a 20-month-low despite profit and boom in dividends.
Safaricom which is Kenya’s most profitable firm accounted for 71.4% or Sh210 billion of the paper loss, underlining its dominance that is discouraging other investors from gauging the performance of the bourse.
The telco together with East Africa Breweries Limited (EABL), Cooperative Bank, Equity and KCB Group led in shedding value in the wake of the sell-off.
Such established stocks are mostly preferred by foreign investors who are selling shares at the NSE, pushing the value of the stocks to levels witnessed last in October 2020 when movements were restricted to stem the spread of Covid-19.
The report comes after NSE found itself in a crisis attributed to scarcity of US dollars in the forex market barely a month ago and the move by the blue chip stocks can make the situation worse.
Depletion of foreign currencies may have negative effects on foreign investors who account for more than 50% of daily trading activities at the bourse.
All there are attributed to poor government policies that do not ensure a conducive environment for businesses to thrive and economy to stabilize.
But in Sri Lanka which is more like Kenya, the citizens mounted pressure on the incompetent President Mahinda Rajapaksa to vacate power after months of protests.
Kenyans are heading to the polls on August 9 and a presidential contender with relevant manifesto is expected to ascend to presidency.
Dynasty members who are hellbent to cling on power are pushing for Odinga’s presidency to maintain the status quo despite the country’s urge for leadership change.
Odinga’s presidency will bring no change but a continuation of Kenyatta’s disastrous tenure which has plunged the country into the current economic mess.
The man to beat remains the Deputy President Dr. William Ruto who is pushing the bottom up economic model as his key campaign message to rescue Kenya from the current economic mess.
DP’s bottom up concept targets to promote investments of ordinary Kenyans and empower them financially for the country to generate taxes to spur the economy. The blue-print will also uplift up to 15 million Kenyan youth who are currently jobless.
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