Living Large: Kenya’s Growing Public Debt

February 7, 2013 § Leave a comment

wpid-debt-2.gifWe learn from History that we don’t learn from History. Those are not my words but words of Desmond Tutu.  Kenya is fast living beyond its means. It seems we haven’t learnt any lessons from other countries whose spending spun out of control. Argentina, Greece, Cyprus and several EU countries come to mind. While Kibaki’s era has been hailed for fast economic growth, it has come at a cost. Kenya’s Public debt has ballooned over the past five years by 87% from Ksh.871 Billion to Ksh. 1.6Trillion. This is nearly half of the Country’s GDP.  While this may appear to be relatively low compared to developed Countries such as Japan and the USA, the situation is likely to worsen now that the Country is moving to a more devolved system of Governance which may require more spending. Already, in the current Financial year, Kenya has already borrowed Ksh.95 Billion + which is way more than had been budgeted for. The upcoming general elections bring back real risks of economic disruption as it happened in 2007-08 Elections. It is imperative to cut unnecessary spending so as to lower debt-to-GDP ratio. While the ideal situation is to spend only what we are able to raise in taxes that won’t be realistic. Lowering debt-to-GDP ratio can only be attained through an economic growth rate of more than 6% and an annual expenditure growth rate of not more than 10%. High level of Public Debt can only end in one way..,the Greek way, higher taxes and cuts in expenditure which will definitely harm the economy. Kenya needs to wake up and act decisively or else we are on our way to being another Morality tale to the world. Refusal to live within your means only ends up in one way…

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