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Raising debt ceiling was not a wise move

Friday November 8 2019

EDITORIAL
By EDITORIAL
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Kenyans should be concerned about the rising debt level and the government’s propensity to fund its commitments.

The developments this week, when the Senate, like the National Assembly, approved a higher debt cap — Sh9 trillion — is detrimental to the country’s long-term economic prosperity.

The government’s justification for higher borrowing threshold is that it needs cash to retire loans maturing in the coming months.

That it wants to restructure its loan book, and get new cash on long term to pay off pending loans.

Underlying this is the assumption that with the new loans, the government can sort out its urgent liabilities and over time improve the economy so that it can pay off its liabilities in the future without distress.

Opinion is divided. That assumption can go either way. More so in a context where many financial decisions are made without proper planning.

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POOR PLANNING

We have seen the administration rolling out populist projects to please the masses and end up sinking billions into them.

Yet nobody takes the politicians to task. The government is piling up liabilities on households.

A newborn enters the world with a Sh189,218 debt on its neck. Every citizen is a walking liability. We are straddling future generations with huge liabilities. What do we have to show for the massive borrowings?

Since 2012, the government has rapidly raised the debt portfolio from Sh1.9 trillion to Sh6.5 trillion this year.

And the explanation is that the cash is used for infrastructure development. Understandably, infrastructural development is core to economic growth, but only if well thought out.

Some of the mega projects developed through borrowed funds have come a cropper due to poor planning, bad execution or sheer embezzlement, with the result that taxpayers end up paying for dead cows.

AUTONOMY

The public expected Parliament to ask tough questions about the new borrowing limits.

The Executive should have been asked to give proper justification for seeking new and higher loan cap and explaining what it has done with the pending loans.

We recall that the government has never convincingly explained how it used the Sh200 billion Eurobond cash secured in 2014. There are many other loans that cannot be properly accounted for.

Failing to raise issues and easily acceding to the Executive’s demands shows a Legislature that is beholden to the State.

It has ceded its oversight role. Which brings the question: who is fighting for the masses?

For the umpteenth time, we argue for prudent management of public finances.

An economy cannot grow through endless borrowing. And the public interest is not served when Parliament fails to tame an avaricious Executive.

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