Kenya must be wary to avoid sinking into debt

The government has once again gone to commercial lenders to raise Sh61 billion for infrastructure development at a time when the country is facing a serious financial crunch.

Infrastructure development is integral to economic development and hardly do emerging economies develop their infrastructure without external debt.

Often times, the government goes for bilateral lending, which in recent years has been from the Chinese Government.

However, this time round the government opted for commercial lenders, ostensibly because the coffers of the bilateral lenders are depleted, with key partners such as China going through an economic meltdown.

Kenya has experience in raising cash from external funders.

Last year, it raised a tidy sum of Sh250 billion through the Eurobond. However, therein lies the challenge.

The government has increasingly developed an appetite for loans, which are sinking the country deeper into debt.

Already, there are concerns that the country cannot pay its debts and that it would be better to consolidate them and find ways of disposing of them rather than seeking new ones.

Unfortunately, the borrowed money is not always put to good use and procedures such as remitting the cash to the Consolidated Fund are not followed.

The classic example is the Eurobond, whose proceeds cannot be properly accounted for.

Governments, just like individuals, thrive on loans.

However, the essence is prudence. Borrowing should be the last resort and only for well-targeted projects.

The public deserves a better explanation why the State must borrow now, what projects it plans to spend the money on, and the terms of repayment.

Treasury managers must exercise diligence in securing and utilising funds.

SOURCE: DAILY NATION