Defer, manage national debt better

The state of our national economy must worry us in this season of the new coronavirus. Even before the Covid-19 disease, Kenya was in a bad place, which the virus can only make worse.

Our public debt, especially, has soared apace over the past seven years. This is a factor of what can only be described as impulsive and poorly planned borrowing, which I have been against.

LOANS

The State has failed to shop around for the best money on the market. We have not taken advantage of the most reasonable facilities available. In effect, we have borrowed on commercial terms when concessionary loans were available.

Throughout last year, and in 2018, I repeatedly spoke about this vexed matter. In one press function after the other, I desperately pleaded with those in government to blunt their appetite for debt. I also called for the need for openness in borrowing.

Responsible borrowing requires that the people be given the details of the funds to be borrowed on their behalf. They need to know the quantum and nature of the loan, the interest and period of repayment. Most importantly, they must also know why we are borrowing. After all, this becomes the people’s money — and debt.

Our laws provide for public participation in finance-related decisions. They also provide for openness on the part of the government, and the citizen’s right to information. Public debt is the one area where it is especially important for the people to know what is happening.

PUBLIC FINANCE

The State is, eternally and primarily, the custodian of public finance and spending on behalf of the citizens.

The details around borrowed public funds should not dwell in secrecy. There are very few occasions when sensitivity to state security may allow non-disclosure at the time. But even then, proper detailed records of accounts must be kept, to be made public in the fullness of time, in line with the Official Secrets Act.

Our rather casual handling of these matters has put Kenya in a terrible place. Public debt has come back to bite us. It is time to repay some of these debts — especially to China, our single-largest lender.

Last year, I urged the State to begin negotiating debt rescheduling with China and some of our other major bilateral and multilateral lenders and commercial creditors, including those in the Eurobond market. However, my pleas ended up as the dialogue of the deaf.

SH6 TRILLION

Rather than look for better ways of managing our situation, the State elected to dig new pits to fill up old ones. When the national debt hit the permitted ceiling of Sh6 trillion, Parliament was prevailed upon to raise it to Sh9 trillion. What was not said was that the State had, in fact, exceeded the borrowing ceiling and Parliament was only rubber-stamping and legitimising it. In this case, Parliament failed the people.

I’ve urged in the past, and I do so, once again, for the need to establish an independent public debt management institution. Today, the function rests with a small office in the National Treasury — in fact, one desk. This desk is completely neutered; it cannot do much to manage public borrowing. An Independent Public Borrowing Authority would bring sobriety to state borrowing.

Meanwhile, the Auditor-General’s office has repeatedly shown that much of this money cannot be accounted for. In this season of coronavirus, it is going to be difficult for us to meet our public debt commitments.

We have far too many challenges in our hands. It was, therefore, good to hear President Kenyatta, at last, say on Thursday last week that the government is exploring debt rescheduling.

WRITTEN OFF

While it comes a little late, better late than never. Details of these dialogues should be made public.

Besides seeking realistic schedules, some of the debts ought to be converted from commercial to concessionary loans or written off. This is especially so for Chinese loans — such as those for the standard gauge railway (SGR). They don’t make sense and must be reviewed.

But, apart from the grotesqueness of these loans, China, as the springboard of Covid-19, owes Kenya some level of compassion and comfort. It has a moral obligation to open up the space for renegotiation.

Finally, the government must publish the full schedule of the public debt. These borrowings are not personal debt for those who negotiated them. The taxpayer, who is repaying them, has a right to know.

Just how deep are these pits? How long will it take to fill them up? What are the penalties for delay or default? How have the debts been collateralised? Does the country risk losing strategic national assets?

We need openness on all these and other questions.

Mr Mudavadi, party leader of Amani National Congress (ANC), is a former Vice-President. [email protected].