Central Bank data show Kenya’s debt is projected to hit Sh9.44 trillion in June, just Sh556 billion shy of the Sh10 trillion debt ceiling set by Parliament last year.
Add to this a weakened shilling and the fact that 69.3 per cent of the loans are dollar-denominated and the urgent need to stop further slide into a debt trap becomes self-evident. Besides, debt servicing costs rose exponentially.
That means there is little or nothing left to stimulate economic production and growth. It does not help that the Kenya Kwanza government plans to raise Sh496.6 billion locally to partly plug a Sh695.2 billion hole in the Sh3.641 trillion budget, its first, a move that will further crowd out businesses from the credit market as banks would be more readily willing to lend to the government than a struggling private sector.
To be sure, the Ruto administration has spelt out a raft of measures aimed at taming the spiralling debt, which stood at a staggering Sh9.145 trillion in December. These include widening the tax base and tightening debt collection.
Some of these measures have, however, raised eyebrows. One is a controversial proposal that the taxman snoop into mobile money transactions to net evaders. The government is also keen to save Sh300 billion from the 2022/2023 budget.
While the country is not at risk of defaulting on its debts, there is an urgent need to go beyond stern pronouncements and enforce austerity measures to reduce wastefulness in government. The government also needs to abandon punitive and questionable tax measures and wage a serious anti-corruption campaign as graft is easily the biggest loophole through which public funds are lost.
For, only measures that will help to rake in more revenue and cut wastefulness will reverse the country’s worrying slide into the looming debt trap.