State piles on Sh1 trillion debt

• Probably cognisant of this, no sovereign bond will be issued this financial year

He further noted most of the Sh109 billion consists of redeeming mature debt rather than fresh borrowing.

Had this year’s Budget been read in the 1990s, the Bretton Woods chiefs would almost certainly have had heart attacks. But tellingly IMF has, by word and deed, supported one of the most extravagant and trickiest budget packages in Kenya’s history.

Curiously, donors appear to have implicitly consented to a policy of no new taxes for consumption in a desperate effort to stimulate the Kenyan and regional economies — in Tanzania’s case they allowed a cut in VAT, from 20 to 18 per cent and a 31 per cent increase in spending.

In addition, most of the tax concession requests, including some repeated yearly by the industry, were granted.

No doubt this has everything to do with the global crisis, an exigency that has left policymakers everywhere throwing hefty amounts of money at the problem.

The first telltale signs that Finance minister Uhuru Kenyatta would get away with what used to translate in IMF books as murder was the Fund’s lending the country Sh16 billion at a time it was engaging in all manner of extravagance.

Instead, at a recent press conference IMF senior representative Scott Rogers was keen to emphasise the need for social spending, which at the time sounded like mere rhetoric given IMF’s history of supporting austerity measures.

But then Mr Rogers went ahead to assert that the inflation rate in Kenya was overstated by 100 per cent, a statement obviously meant at allaying fears of the effect of the pending borrowing and huge budget outlay.

If the growth projection holds and the monetary policy holds rates down, inflation and interest rates may well be controlled at reasonable levels.