The World Bank issued a warning against continued borrowing by the Kenyan government to fund the Big 4 Agenda, indicating that the continued debt growth may lead the country in the wrong economic direction.
In a story by Bloomberg on January 23, the World Bank cautioned that Kenya's debt ought to be checked against the increased repayment burdens for matured loans.
During an interview with the publication, World Bank Chief Economist Pinelopi Goldberg indicated that it's time Kenya adopted new measures including restricting the country to long-term loans.
“It may be better to slow down, perhaps cut back on borrowing, and financing big projects.
“Take more of a long-term perspective and make sure that the way these projects are financed is truly sustainable,” remarked Goldberg.
Further, Kenya was advised to embrace the involvement of the private sector as a way of checking on the high costs of loans.
"Kenyatta is racing to deliver 500,000 affordable houses, provide equipment in hospitals, open up new farmlands with irrigation and double electricity-production capacity by 2022 when his term ends.
"While there is a provision for private investors to participate in these projects, the government still has to spend to a great extent as well,” quoted the publication.
This comes after the International Monetary Fund in November 2019, indicated that Kenya should be cautious in piling up debts after it amended its borrowing ceiling upward.
Further, the finance organisation warned that funding the “Big 4” projects within a short period of five years would certainly put pressure on the government's borrowing and ultimately slows down growth.
In October 2019, the World Bank released a report warning that Kenya was drifting towards debt distress, owing to the government’s huge appetite of acquiring expensive loans.
The report further cautioned that Kenya's debt distress, which was earlier classified as low, had risen to a moderate level driven by the government’s rapid uptake of loans that led to the total public debt hitting Ksh5.7 trillion.
Despite multiple warnings against the increase in debts, the Senate went further to approve a raise in the debt ceiling from Ksh6 trillion to Ksh9 trillion in October 2019.
The National Treasury indicated that the step was aimed at addressing the budget deficit in the country’s budgetary allocations.
Speaking to Bloomberg on Thursday, January 23, Central Bank of Kenya Governor Patrick Njoroge indicated that the debt rose due to major infrastructure projects that the country had undertaken in the past years.
“Debt level in the country is at 62 per cent of the GDP. The increase was to finance significant infrastructure projects. There is less or no room for additional debt financing and therefore, we need to look at other forms of financing like public-private partnerships.
“We need to know how to energise the economy to increase the economy's repayment capacity.
"We are struggling but this is a transformative issue,” remarked Njoroge.
