President William Ruto on Monday, February 13, reiterated that the government will go forward with the plan to cut on foreign borrowing.
The President’s statement was made the same day the Parliamentary Budget Report (PBO) warned the Head of State over his stance on foreign loans.
Ruto remarked that even though the measures will hurt Kenyans for a while, it was for the long-term good.
“We have not entirely stopped borrowing but what we have done is put measures to stop wanton borrowing.
“When I was sworn in, I found that we were poised to borrow Ksh1.2 trillion but through austerity measures, my administration has been able to bring down that figure to Ksh830 billion,” he explained.
The PBO had warned Kenya that the world was in a global recession and cutting on foreign borrowing would hurt the economy.
“Despite the perceived gains of fiscal consolidation on debt accumulation. Conventional wisdom indicates that this is likely to have a contractionary effect on the economic activity, at least in the short run,” the report read in part.
The report further advised that to spur economic production in the country, the economy required injections into the financial systems through loans.
“The strategy that has been adopted by the current administration is contrary to what is needed. By reducing government expenditure, it will invariably lead to lower output,” the report had warned Ruto’s regime.
PBO advised the government that instead of cutting foreign borrowing, it should aim to strike a balance that will be able to undertake fiscal consolidation without harming economic growth.
Currently, Kenya’s foreign debt is at Ksh10 trillion, a situation Ruto blamed on the former administration.
“The former administration was using Ksh8 billion in two months to subsidize maize flour and Ksh15 billion every month to subsidize fuel,” he revealed how the debt had ballooned.
