Treasury Cabinet Secretary, Professor Njuguna Ndung'u, on Thursday, June 15, confronted inquisitive journalists seeking clarification on budget allocations and proposals he made while addressing Parliament.
CS Ndung'u provided an explanation regarding Kenya's debt repayment strategy by outlining the core principles of public debt management. He clarified that the national debt signifies the monetary liabilities that a country owes to its creditors.
"Let me school you a bit on borrowing which is an act of taking a loan from a creditor. Governments borrow money for various reasons, such as to finance wars, build infrastructure, or provide social services.
"There are a number of principles that govern national debt and borrowing. These principles include sustainability. The government must ensure that its debt is sustainable, meaning that it can afford to repay the debt and interest payments without putting a strain on the economy," CS Ndung'u explained.
He stated that President William Ruto's government will regularly update the country on its debt levels and repayment plans to foster transparency and accountability.
The State will also ensure that the government is held accountable for its debt and that funds borrowed are properly utilised.
"These principles help to build trust between the government and its creditors. Third, they help to ensure that the government uses the money borrowed for its intended purposes," CS Ndung'u explained.
Further, the Cabinet Secretary addressed risks associated with national debt and borrowing but assured that the government was setting up measures to prevent Kenya from defaulting.
"The government may default on its debt, meaning that it is unable to repay the debt or interests. This can lead to a loss of confidence in the government, dampening efforts to borrow money in the future.
"If the government borrows too much money, it can lead to inflation, which can erode the value of the currency and make it more difficult for people to afford goods and services," Ndung'u explained.
Borrowing too much money can also lead to an economic slowdown, as businesses may be reluctant to invest or hire due to uncertainty about the future.
"The risks of national debt and borrowing can be mitigated by following the principles of sustainability, transparency, and accountability," he explained.
Kenya owes its creditors Ksh9.4 trillion with China's debt totaling Ksh800 billion, Japan Ksh104 billion and France Ksh101 billion as of March 31, 2023.
A whooping Ksh607 billion was allocated to repay debts in the Ksh3.6 trillion 2023/24 budget.
