On debt, we have a big problem

Debt burden concept. FILE PHOTO | NMG

President Uhuru Kenyatta used his Madaraka Day speech to outline the achievements of his administration from 2013. He gave himself a straight A based on the work he has done in several sectors, including infrastructure, health, education and water. There can be little quibbling with the President’s record and score.

There is, however, the small matter of debt. Justifying the amount of debt his administration has borrowed, the President said that as long as amounts borrowed are in the hands of a visionary administration then such money is actually a critical catalyst for development.

The problem is if the administration is unscrupulous. The President‘s statement is correct. The bigger question is whether the debt has been mismanaged.

On his own admission a few months ago, the country loses Sh2 billion every day. While there has been contestation about the accuracy of these figures by President Kenyatta, the point is that corruption continues to be an endemic problem for this administration.

Therefore, the debt burden the country continues to bear is only partly accounted for by the development projects over the last nine years. There is quite a chunk of that money that has been misused.

Consequently, as opposed to advising to the next administration not to shun debt and to ignore the naysayers on this issue, it is important that the leading political formations look at the debt question more critically.

In real terms, the fiscal space available for the incoming administration is less than what the Jubilee administration inherited from President Mwai Kibaki’s. As a result, the attitude towards debt must also be markedly different. We need debt consolidation and debt reduction, not more debt.

While there is debate whether Kenya’s debt situation has crossed the red line, the reality is that debt reservicing is currently the largest expenditure item in the budget. This makes it difficult for the government to invest in development after paying its recurrent obligations.

It is critical that the next administration prioritises reducing this ratio progressively. Its key focus must be on fiscal sustainability by reducing the country’s overall debt situation and not continuing with the borrowing spree.

In the short term, this requires making drastic and painful decisions. First, several of the promises being made on the campaign trail will either be dropped after the election or deferred. With the current financial situation, funding them is close to impossible.

There are several urgent initiatives that require attention. First, the overlaps in terms of functions and personnel between national and county governments must be addressed.

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

Schedule Four of the Constitution has to be respected and adhered to in full. For functions that have been fully devolved, the national government must release the resources and reduce its personnel to align with the reality. It does not pay that agriculture continues to have huge staffing at the national level 10 years after devolution.

Secondly is the restructuring of parastatals. Several years after the Taskforce by Abidakir Mohamed, the comprehensive amalgamation that was envisaged for parastatals is yet to be done. The consequence is that these agencies continue to be avenues for revenue leakages.

Third is the question of corruption. On this, the President was spot on. The country must make deliberate steps to slay the dragon of corruption.

The amount of money we lose to corrupt activities is such that if we seal corruption loopholes then we can recover the economy and grow it again just like happened during the NARC years. This is the sure way of ensuring that we bring down the debt levels and only borrow within the acceptable limits.