On the debt, we have a big problem

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On the debt, we have a big problem


Debt burden concept. FILE PHOTO | NMG

President Uhuru Kenyatta used his Madaraka Day address to outline his administration’s achievements since 2013. He awarded himself an A based on the work he has done in several sectors including infrastructure, health, education and water. There may be few quibbles with the president’s record and score.

There is, however, the small issue of debt. Justifying the amount of debt his administration has borrowed, the president said that as long as the borrowed amounts are in the hands of a visionary administration, that money is in fact a critical catalyst for development.

The problem is that the administration lacks scruples. The president’s statement is correct. The big question is whether the debt has been mismanaged.

By his own admission a few months ago, the country loses 2 billion shillings every day. Although the accuracy of these figures has been disputed by President Kenyatta, the fact is that corruption continues to be an endemic problem for this administration.

Therefore, the debt burden that the country continues to bear is only partly attributable to the development projects of the past nine years. Much of this money has been misused.

Therefore, instead of advising the next administration not to run away from debt and ignore opponents on this issue, it is important that the leading political parties take a more critical look at the issue of debt.

In real terms, the fiscal space available to the incoming administration is less than what the Jubilee administration inherited from President Mwai Kibaki. Therefore, the attitude towards debt must also be significantly different. We need consolidation and debt reduction, not more debt.

Although there is debate over whether Kenya’s debt situation has crossed the red line, the reality is that debt servicing is currently the single largest item of expenditure in the budget. It is therefore difficult for the government to invest in development after having paid its recurrent obligations.

It is essential that the next administration prioritize the gradual reduction of this ratio. Its main objective must be fiscal sustainability by reducing the country’s overall debt situation and not continuing the borrowing spree.

In the short term, this requires making drastic and painful decisions. First, many of the promises made during the election campaign will either be dropped after the election or postponed. With the current financial situation, their financing is almost impossible.

There are several urgent initiatives that require attention. First, overlaps in terms of functions and personnel between national and county governments need to be resolved.

The Intergovernmental Relations Technical Committee has its work cut out for it. It must accelerate the implementation of the unbundling of functions to avoid the permanent duplication of functions and personnel for similar tasks.

Schedule 4 of the Constitution must be respected and respected in its entirety. For functions that have been fully decentralised, the national government needs to free up resources and reduce its staff to align with reality. It doesn’t pay that agriculture continues to have huge numbers nationally 10 years after devolution.

Second, there is the restructuring of parastatals. Several years after Abidakir Mohamed’s task force, the global merger that was envisioned for the parastatals has yet to materialize. The consequence is that these agencies continue to be sources of revenue leakage.

Third, the issue of corruption. On this point, the president was at the rendezvous. The country must take deliberate action to slay the dragon of corruption.

The amount of money we lose to corrupt activities is such that if we seal the cracks of corruption, we can recover the economy and make it grow again, as happened during the NARC years. This is the sure way to ensure that you reduce the level of indebtedness and that you only borrow within acceptable limits.

About Michael Terry

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